The Big Flop - Sam Bankman-Fried: The Downfall of a Crypto Bro with Fabrizio Copano and Zoltan Kaszas | 50

Episode Date: August 26, 2024

Sam Bankman-Fried was the king of crypto, living large in a penthouse in the Bahamas. But his billion dollar empire was built on a foundation of fraud, and when his dubious deals were exposed, this crypto bro went from blockchain to a cell block.Fabrizio Copano (4th From the South) and Zoltan Kaszas (This Week in Zoltan, Honorary Jones) join Misha to decrypt how Sam Bankman-Fried lost his shirt--his grungy, rumpled shirt.Listen to The Big Flop on the Wondery App or wherever you get your podcasts. You can listen early and ad-free on Wondery+. Join Wondery+ in the Wondery App, Apple Podcasts or Spotify. Start your free trial by visiting wondery.com/links/the-big-flop/ now.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Wondery Plus subscribers can listen to The Big Flop early and ad free. Join Wondery Plus in the Wondery app or on Apple podcasts. Sam Bankman Fried, better known as SBF, is working late, but he's in his luxury penthouse apartment in the Bahamas, so don't feel too bad for him. Sam's penthouse doubles as the headquarters of FTX, the cryptocurrency exchange he founded, bringing him unimaginable wealth and fame. Magazines are putting Sam on their covers. He's been on stage with Tony Blair and Bill

Clinton and partied with Kate Hudson and Katy Perry, a real murderer's row of people who used to be more popular. Still, at just 30 years old, Sam's the face of cryptocurrency, even though nobody really understands what that means. Sam runs his hands through his hair and fidgets in his trademark uniform, oversized t-shirt, cargo shorts, and sneakers. He keeps a beanbag chair next to his laptop for some micro-naps, which may be cool for a college kid, but is a bit weird for a billionaire CEO. Anyway, Sam has no time for micro naps right now.

He's under a lot of pressure. In the last month and a half, FDX declared bankruptcy. Customers think they're going to lose a fortune, and they are very angry at Sam. SPF stops typing mid-email. The penthouse is right by the ocean. In tranquil moments, you can hear the waves crashing against the shore.

The quiet is broken by a knock at the door. Usually, a late-night visitor might mean a takeout delivery or maybe some amphetamines, a little treat to help him keep trading crypto all night. Sam eagerly pulls open the door, only to find that it's not DoorDash, it's the Bahamian police, and they're here to put Sam under arrest. But maybe on the way to the station, they'll let him pick up a slice of pizza? I am here with Sam Bankman Fried. He is the CEO and founder of the crypto change. FGX.

Sam Bankman Fried was a crypto billionaire enjoying the high life in the Bahamas. Today, he stands in the dock in a New York courthouse accused of one of the biggest financial frauds in US history. The cryptocurrency industry might be new. The players like Sam Bankman-Freed might be new. But this kind of fraud is as old as time. I should have been on top of this and I feel really, really bad and regretful that I wasn't.

And a lot of people got hurt. And that's on me. We are on a sinking ship From Wondery and Atwill Media, this is The Big Flop, where we chronicle the greatest flubs, fails, and blunders of all time. I'm your host, Misha Brown, social media superstar in a five million person polycule at Don't Cross a Gay Man. And today we're talking about Sam Bankman Fried and FTX, his cryptocurrency exchange that turned out to be less stable than a crypto bro trying to walk around on stilts after I'm Alice James. And I'm Colin Murray. And we are the hosts of Everything To Play For. And our next two-parter is all about the great Tanni Grey Thompson.

Eleven Paralympic golds, six London marathons now, an important cross-bencher in the House of Lords. And what makes this two-parter different than anything we've recorded before, Ellis? Finally, I get to discuss a Welsh athlete. My henwll a ddvann a ddian an oeil i mi. I hear no lard, but I die an' I know it'll leave me. No, it's that Tanni Grey Thompson is in the studio. Yes, and there's that.

All my medals are in a rucksack anyway. They're all kind of wrapped up. So if you came to a house, you wouldn't see... A rucksack? Yeah, a rucksack. You don't want to stick them all out on the wall, do you? I mean, that'd look a bit naff. Follow everything to play for on the Wondry app

or wherever you get your podcasts. You can binge seasons early and ad-free right now on Wondry+. On our show today, we have an amazing comedian. He's done it all, from hosting hosting a late night show to writing a memoir about his rise as one of Latin America's best known comedians, it's Fabrizio Capano. Welcome to the show. Hi everyone, I hope not be part of another episode about my life. So thank you for inviting me to this episode about other people's failures.

Yes, yes. Also on the show today we we have a stand-up comedian who is one of the internet's most established cat people. His newest special, Honorary Jones, recently dropped on YouTube at Zoltan Casas. Welcome. Hey, thank you so much for having me. So exciting.

So when did you all first hear about cryptocurrency? It was 1998. It was a hot summer. No, actually, probably like five years ago, someone started mentioning, but first like the NFTs was the first thing I heard about it. And I was like, this is a scam. My best friend who was my neighbor during the pandemic

was like, you should get into cryptocurrency. And I was like, you drive a truck. I don't know if you know anything about finance. Fabrizio, have you dabbled in crypto? If I have any of those monkey pictures? I have to be honest, I hate crypto from the beginning because I'm from Latin America. And when I was there,

every time I was making any amount of money, people was like, well, that's not real money. Those are pesos. You have to make dollars. You know, that's an actual currency. And then I moved to this country right on time when people was like, no, now we have to get Blipcoin. And I feel like they were moving the goalpost for me. Or Zoltan, have you ever borrowed something from someone

and then not been able to return it, like, I don't know, billions of dollars? No, I think if I did borrow that much, you wouldn't see me ever again. So I might be able to relate to this guy. Yeah. Well, you can't understand what happened to FTX without first understanding Sam Bankman Fried. -♪ Sam Bankman Fried, often known by his initials, SBF,

grows up in the late 90s in the Bay Area in an academic, intellectual environment. His parents are both professors at Stanford Law School. Sam enjoys math puzzles, baseball statistics, and Harry Potter. But he doesn't show much interest in other kids or in a lot of things kids are usually excited about. Like, when he's growing up, his family doesn't celebrate holidays or birthdays, and Sam doesn't seem to mind at all. Wait, what? Not even Christmas? Like, no birthdays?

No birthdays. Wow. No celebrations. So he's been plotting this the whole time. I think so. Yeah. But he doesn't seem to care about fitting in, an attitude that continues into his adulthood,

particularly in terms of the way that he dresses. So here's a photo of Sam at a cryptocurrency conference. Which one do you think he is? Wow, he's there to help to set up the stage. This is like before they started the event. He's the tech guy who's going to help him set up the stage. This is like before they started the event. He's like the tech guy who's gonna help them with the mics. What's going on here? Oh, yeah.

He looks like he went to the gym and someone stole his clothes. I mean, the problem here is like, because there's no celebration in his family, there's no way someone can give him a shirt or pants. He was never gifted a nice outfit. Yeah, so have no idea how clothes works. Yeah, so for everyone listening, he's just wearing a t-shirt and some cargo shorts, some beat-up tennis shoes,

and he's on stage with people who are clearly dressed for the occasion. But the thing about Sam Bankman-Freed is that's what he always wears. In high school, Sam graduates at the top of his class, even though he struggles with his humanities courses. He just doesn't have any patience for things that don't interest him, like literature or other people. Okay, I can see where we're going here. Yeah. However, according to Sam, he was able to get good grades in English because, in his words, quote, I convinced the teachers that I was a good student, and thus I got good grades.

Wow. Yes. And now that's a pattern that will continue through this whole saga. For Sam, if you can get people to believe something is true, you can make it true, even if it's very much not. How do you think you might try to convince a teacher that you're a good student without actually being one?

I have no, I didn't pull it off. I know that. I had 12 years to try and I never pulled it off. So I have no clue how to do that. I don't like lying to people. Maybe that's the problem. Wow. Yeah. That's why you're not in the world of finance. Nope.

Yeah, exactly. That is huge in the world of finance. Yeah. Yeah. So SPF winds up at MIT studying physics and after college, he lands a high paying job as a trader on Wall Street. Trading, unlike homework, gets Sam's complete attention.

He's finally found something that really captivates him and he throws himself into it completely. Obviously, he's still not fitting in with his colleagues, maybe because he keeps wearing his signature outfit instead of a suit like other traders. It's giving... tourist? Yeah. Do you know anyone like that who just wears shorts and t-shirts to everything and somehow like gets away with it? I mean, I don't know people with that much money. I think you need like the confidence of money to do that in life. I don't think like a regular person can do that every day in their jobs or even in like

social events. Yeah, that big money energy. Yeah, the fact that he came from money and chose shorts is an interesting thing. Cause I grew up in the trailer park and shorts is the uniform. So like, I get that. But like from his background, yeah, he's doing things different.

Well, despite the scandalous fit, or maybe because of it, he does attract one colleague's attention. During his time on Wall Street, Sam meets Caroline Ellison, who will become his partner in romance and also billion-dollar scandals. Caroline works at the same firm as him, comes from a similar background, has similar interests. Well, sorry, I just want to know what kind of clothes she's wearing.

Because if this guy's in shorts and this woman is wearing a very beautiful outfit, I don't think this is even real. And I'm just thinking like spaghetti strap tank top and low-rise jeans, you know? Britney Spears in a gas station. Yeah, yeah. Now, both Caroline's parents work at MIT, and as a kid kid she participated in math competitions. Caroline, like Sam, also has an unusual relationship to birthdays. One year, instead of making her dad a card, she wrote him a paper analyzing the prices of stuffed animals.

I hate these people so much. I hope they die in jail. I really hate these humans. Wow! They're so annoying. These people are so annoying. I agree with you. I will say, it is kind of beautiful that they found each other. They are similar in other ways as well. In college, they both became interested in what's called effective altruism, which is a philosophy that basically says the best approach to charity is to make a lot of money because the more money you have, the more money you can give away.

Oh, because that usually works. Oh, so that's the long term plan is they gather it all. And then at the end, big disbursement. So we'd be like judging billionaires the wrong way this entire time. They're just doing this for us. They're suffering so much just to help us. Exactly. I just want to give a shout out here in the podcast to every billionaire who is listening

because you guys are working so hard to make the world a better place that I'm just so proud of you guys. So thank you. Keep up the good work. Something most adults don't hear enough. I'm proud Thank you. Keep something most adults don't hear enough. I'm proud of you. Well, in 2017, Sam starts to realize that he can apply the skills

he's learned on Wall Street to trading cryptocurrency, where he sees big money making opportunities. Bitcoin has only been around since 2009. And for the first few years of its existence, it basically had no value. But things change quickly. And by the beginning of 2017, the price of Bitcoin is at $1,000. And just a little over six months later, it hits $4,000. Now that's the sort of thing that gets people's attention.

So what exactly is cryptocurrency? To find out, let's play a game. Now this is one of our most challenging games that we've ever had on the show. The game is, in seven seconds or less, can you explain what cryptocurrency is? Wow. Okay, Fabrizio, you're up first. In seven seconds or less, explain what cryptocurrency is and go.

Okay, if you have a bean in your house and you put it in your front yard and you make a hole and you put some water in it and then like a little plant will grow in a couple months, that's not a cryptocurrency. But if you think that air has some value in the internet for no reason, that's a cryptocurrency. That makes sense? Sure, sure. Very nice. All right, you're up, Zoltan. Seven seconds. Explain what cryptocurrency is. Go.

This is what I was told. Every question I had, it was answered by another word I didn't know. So I'm like, what's cryptocurrency? And it's like, don't worry, they mine it. And I'm like, what's that? And they're like, don't worry, there's a blockchain. And you're like, we're getting further away from my question altogether. And then they end up getting angry and then you end up buying some and then they leave

you alone Amazing. Well, that was a good effort all around and you're both winners in my book. Thank you so much. You're very welcome Okay, well to keep it very very short Basically what you need to know about crypto is that it's a digital currency. And while it can be used to buy things directly, many people also hold onto it as an investment, like a stock. And because cryptocurrency like Bitcoin is decentralized, it isn't issued by any country or government, there are also people who believe it is the future and will gradually make conventional financial institutions obsolete. That all sounds great to Sam, and in 2017, he leaves his Wall Street gig to start his

own crypto-focused trading firm, Almeda Research. Soon after, Caroline also quits her job to join the firm. Have you ever left a job to follow someone else? No. Well, first you need to have a job to let the job. So it's hard for us as comedians. That is a very solid point. I feel like now I can see a love story behind all of this.

Like quitting your job just to make more money, that's real love. Mm-hmm. Well, it's around now that Sam and Caroline also start that romantic relationship. Now, the timeline around their involvement is murky because frankly, it seems like their actual relationship status was also extremely murky. It's like not only are they not putting labels on their relationship, they've taken the label maker and just thrown that bitch in the dumpster. The term that many use to describe them is on and off again. But if you wanted to put it in crypto terms,

you might call it a decentralized relationship or a relationship whose value tends to wildly swing up and down. Wow. Caroline is also reportedly interested in polyamory and more on that later. But in 2018, Sam moves to Hong Kong because it turns out that Hong Kong has fewer regulations about the types of trading that Sam is interested in doing. And eventually, Caroline joined Sam there as well. In 2018 at Almeida's height, Sam says the firm was making daily trades of as much as $25 million of crypto.

So Hong Kong is like the world's Florida. Yeah, I think so. No regulation, polyamorous relationships everywhere. That's the way they roll. I'm Raza Jafri, and in the latest season of The Spy Who, we open the file on Willie Carlin, the spy who sold peace to the IRA. When Carlin quit the British Army to return to Northern Ireland during

the Troubles, he received an unusual job offer to spy on his own community. He would quickly find himself deep within the Irish Republican movement, having to choose between preserving his cover or his conscience. For 30 years, paramilitary groups from both sides murdered, maimed and bombed, while British intelligence waged a dirty war in the shadows. Follow the Spy Who on the Wondery app, or wherever you listen to podcasts. Or you can binge the full season of The Spire Who Sold Peace to the IRA early and ad-free with Wondery+. My name is Georgia King and I am thrilled to be the host of And Away We Go, a brand new travel podcast on Wondery+,

where we'll be whisked away on immersive adventures all around the world. Where we go, what we do, what we eat, drink, and listen to will all be up to my very special guests. We've got Ben Schwartz taking us on a whirlwind trip around Disneyland. We'll eat a bowl of life-changing pasta with Jimmy O'Yang in Tuscany, Italy. And how do you feel about a spot of sugaring off with Emily Hampshire in Montreal? And Away We Go will immerse you in some of the wonders of the world. We're gonna be seeing some yellows and vibrant oranges.

And the shoes clicking against the cobblestone. If you're looking to get somebody in the mood, have them look at the Chicago skyline. You can listen to And Away We Go exclusively with Wondery Plus. Join Wondery Plus in the Wondery app or on Apple podcasts. Georgia, do you know what joy sounds like? I think I'm hearing it right now.

Now, with all his cryptocurrency trading at Alameda, Sam sees as an opening in the market that no one else seems to have noticed. Most exchanges are focused on individual traders rather than firms like Almeida that trade large amounts of cryptocurrency. So in 2019, he creates a new crypto exchange, a platform for buying, selling and trading crypto that would appeal to traders looking to make more complicated transactions. It's called FTX. What do you think FTX stands for?

Financial, terrestrial, zena, I think. I wouldn't be surprised if none of it makes sense. Well, I wish I had more of an exciting answer for you, but it stands for Futures Exchange. Very generic finance company name. Kind of like if you called the company Money Business. Right. But they spelled it with an X, kind of like when deodorant tried to keep up with the times in the late 90s and everything was extreme.

Oh yeah. They threw an X on there. That's snazzy. I like that. Edgy. Yeah. Well, SBF gets an early boost for FTX by selling a portion of the exchange to Binance. At the time, Binance is the biggest crypto exchange in the world.

The founder of Binance is Zheng Peng Zhao, and you should remember that name because it'll be important later. FTX gets $70 million from this deal, not too shabby. And Sam also puts Caroline at the head of Almeida as he makes the move over to FTX. Wow. Is this so beautiful? I mean, this is like a romantic story. I thought it was about, like, these people taking money from others,

but this is honestly just about love. This is a love story and money is just the conduit to their hearts. Exactly. At the end of the day, they're just making all this money to help others. So it's just love. FtX quickly becomes one of the biggest exchanges in the world, thanks to Sam, who goes all-in on marketing. He starts an ad campaign for FTX with Steph Curry and Tom Brady. He spends $135 million to rename the Miami Heatz Arena to the FTX arena. He spends another $210 million to put the FTX logo

on an e-sports league. At this point, he probably would have paid a couple million dollars to sponsor a little league baseball team. He also produces a Super Bowl commercial starring Larry David. The premise is basically crypto is a historic innovation on par with the wheel and the light bulb and if you don't get in on it now you'll miss out. Let's take a look.

Hey Katherine, what's cooking? We're putting the man on the moon. Are you out of your mind? I can't even get tuna without celery. Nobody's going to the moon ever. Why not? It's too far. I even remember watching this live on the Super Bowl. Oh yeah?

Yeah, and being like, okay, you remember every episode of Curb Your Enthusiasm? Mm-hmm. It's not ending well. So, why are you putting that character in your company, you know? Well, as FTX's star rises, SBF also becomes a celebrity in his own right. At FTX's peak three years after its founding, the exchange is bringing in $40 billion. And by the age of 29, Sam is worth over $20 billion himself. And a partner at a big Silicon Valley venture capital firm even speculates that SBF might

wind up being the world's first trillionaire. He's on the covers of magazines like Fortune and Forbes. He was spotted at the Super Bowl with Orlando Bloom, Kate Hudson, Katy Perry. He even appears on stage with Tony Blair and Bill Clinton. And always with the same clothes. Always. In all these magazines, in all these events. Not even different outfits with shorts.

No, it's the same pair of shorts for 10 years. He's clearly an Adam Sandler fan. Like Adam Sandler shows up to award shows dressed like a garbage bag. And it's like, I think that's part of his charm. And he's like, oh, maybe I can rent some Adam Sandler charm. If you were a billionaire, would you go for the I just rolled out of bed look or more of a rich uncle penny bags, fancy dress look?

I would pay, I don't know, some company to make people forget what I look like. I think being the world's first trillionaire is the worst thing that could ever happen to somebody. That's very smart. No, actually I will go the opposite way. I'll be like covering gold or something like that. Yeah.

I mean, I'll be like so stupidly rich. Every day will be the Met Gala for me. Every day. Tremito said, I will be insufferable. Yeah, I will be the worst person ever because if you're that character, you have to be the worst person ever. Well, Sam also continues to talk extensively about that effective altruism in the press, but some people claim that this talk about charity is more of a PR move than a reality. In 2021, his total lifetime charitable donations amounted

to $25 million. To be clear, that's a lot of money. If anyone wants to give me $25 million, you're more than welcome to. But this is only about 0.1% of his net worth. And he's ranked as one of the least charitable people on Forbes list of the 400 richest Americans. Wow. Sam, in response to questions about this, says that his charitable work is quote, not a short-term goal, it's a long-term one. You gotta be patient. I mean, if you know something about people who needs money, it's that they don't need it now. Yeah. They just, they can wait.

I mean, honestly, they can wait decades and decades. I feel like it's like a kid's excuse for why they haven't finished cleaning up their room yet. It's not a short-term goal, mom. It's a long-term one. God! Room wasn't built in a day, and I can't solve homelessness in two. Actually, you can. You can. It's like giving them money.

Yeah, you can. You actually could. Well, Sam also becomes a big political donor, though there's speculation that he's mainly interested in politics to put a halt to any additional regulations on cryptocurrency. Can you imagine? Classic. I don't think so. Not that kind of guy. No. to halt to any additional regulations on cryptocurrency, can you imagine? Classic. I don't think so.

Not that kind of guy. No. SBF also winds up moving FTX down to the Bahamas, probably just for the beautiful beaches and sun, right? Well, that probably doesn't hurt, but he also prefers the Bahamas crypto regulations, or lack thereof. Caroline, our fave, she eventually joins Sam in the Bahamas where their lifestyle is swanky.

They live on a property worth $35 million dollars in a penthouse with Italian marble floors, a spa, an outdoor pool, a jacuzzi, and a baby grand piano. We actually have a picture, so let's take a look. I want to see this. This is on Zillow. This is... LAUGHS Wow, I don't even know what that building is.

What is that? Could you describe it to the best of your abilities? Not great. It's like an architect started microdosing. LAUGHS It looks like, you know what, like these car rentals? Carvana. Yeah, it looks like Carvana for houses. It does.

It does look like that. It looks like a condo wearing lingerie. Oh, yeah. The strap down from the underwear down to the thing that holds up the high socks. You can tell I know a lot about lingerie by my description. The high socks. That was very sexy, by the way. Yeah.

That's what I'm seeing. Well, Sam and Caroline live in this fancy setup with eight other people, including Nishad Singh, FTX's director of engineering, and Gary Wang, FTX's chief technology officer and co-founder. This is not related to the polyamorous part? What? Eight people in the same house. Well in one article published by CoinDesk, a site focusing on crypto news, the penthouse

is described as a cross between a luxury dorm room and a jury-rigged trading floor. Hmm. So Sam and Caroline are living large, but they're about to go from baby grand piano to sad trombone. -♪ TROMBONE PLAYING A SAD TROMBONE TONE. -♪ BOTH LAUGHING Now, what do you think would happen

if you gave a bunch of people living in a dorm room access to billions of dollars. They'll manage it responsibly? They will build a better society with it? Well, Sam and Caroline are definitely mixing business and pleasure in their luxury penthouse. And things are about to get even more skewed to the pleasure side of this equation. According to the New York Times, traders are starting to use stimulants as a routine part of their work days.

In 2021, Caroline even tweets, Nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experiences. That's a whole sentence? Yeah. Wow. And there's no spacing in that sentence, bro. We're blinking. I can imagine her writing this in kind of like The Shining.

Like, you know, like, writing this over and over again, like tweeting the same tweet over and over again for days. Oh, and the roommates may even be in different combinations of romantic relationships with each other. Caroline writes about the polyamorous lifestyle, quote, I've come to decide the only acceptable style of poly is best characterized as something like Imperial Chinese harem. None of this non hierarchical bullshit. Everyone should have a ranking of their partners. People should know where they fall on the ranking and there should be vicious power struggles for the ranks.

Oh, wow. That sounds so much like a cult. These people are just writing a Netflix show. They're not living a life. It is a reality show. Where do you think you would fall on Caroline's polyamorous ranking system? I mean, listen, this woman was dating a guy who was wearing those shorts. I think it can do better than that.

That's a solid point. I mean, like if you wear joggers, at least, you're like two steps up on Sam Bankman Freed right there. And that could make the difference. Well, all of this obviously creates a really messy mixture. Even if everything in the business was being run completely above board, but the business is not being run above board.

The thing that will eventually get SBF and FTX in trouble is that they are taking money from FTX customers and putting it into Alameda research. Alameda is then using that customer money to invest in other cryptocurrencies. You are definitely not supposed to do this. And in fact, it's explicitly against the FTX terms of service for them to be using customer money in this way.

Wow. So this means the company itself wasn't reading the terms of agreement. Like, nobody's reading this thing. We're just hitting accept and moving on with our lives. Exactly. Now that should be a pretty easy promise to keep, just don't spend money that doesn't belong to you. So you're not supposed to do this in general? I mean, I'm sorry, I have to make some phone calls again. You're like, wait a minute. Wait, you're not supposed to spend all these people money? Wait a second.

You learn something new every day. So not long after FTX's founding, Sam told Gary Wang, his chief technology officer and co-founder, to change the platform's code so that Alameda would have special privileges on the exchange. This lets Alameda do things that nobody else on FTX can do, like have access to a line of credit that was essentially unlimited and even let them run a negative balance. Let me put it to you this way. If you were at a casino and every time you ran out of chips, the casino kept giving you more, what would you do?

I would never leave. I think I would live at that casino. You would continue saying, hit me on blackjack. Yes, you just keep playing. And that's basically what they're doing with Alameda and FTX. So in private, Caroline warns Sam multiple times that things might go wrong with this arrangement. At one point, when Caroline tells him how bad it could get, Sam replies, quote, yup, and it could get worse. OK. Good communication between them.

It's very direct. You know, he's very direct. But Sam's thinking seems to be that as long as Alameda's investments make money, they'll be able to replace the money that they borrowed from FTX customers before anyone notices it's gone and there won't be any problem.

Bullproof. It's sort of like if you were to take money out of your little brother's piggy bank and use that money to start a lemonade stand. As long as the lemonade stand makes money, you'll be able to put that money back before your brother notices it's gone and tells on you. Also, you're doing too many amphetamines

while you're making the lemonade and you are in a polychool with some of the other people running the lemonade stand and the lemonade is somehow worth billions of dollars. That makes perfect sense. The bottom line is, SPF will be able to keep FTX and Alameda afloat as long as a bunch of people don't decide to take all of their money out of FTX at once.

So what do you think happens next? A withdrawal, please. Ha ha ha ha! So things start to go south for Sam Bankman-Freed on November 2nd of 2022, when the crypto news site CoinDesk publishes an article indicating that Alameda's finances may be in worse shape than they appear. The key revelation is that a large part of Alameda's assets are made up of a cryptocurrency that was issued by FTX. And at this point, you get it, that ain't good.

Four days later, Zheng Pengzhao, SPF's crypto bro rival, who you may remember I told you to remember, announces that his company Binance will sell its holdings of FTX crypto. Now this causes more and more customers to try to take money out of FTX. Cue the old timey sped up footage of a bank run. In only three days, customers take $6 billion out of FTX. At which point, FTX no longer has the cash to pay back

people who want their money. I feel like every time you keep talking, like one of these floors of that building goes down. Just grumbling. This is great. One less and less and less. of that building goes down. You know? Just grumbling. This is great. One less and less and less. Yeah.

Now remember, all that FTX money that's being used to buy lemons and sugar for that billion dollar Alameda lemonade stand, around one million FTX users stand to lose their investments. And for some of these people, that's their life savings. Wow. How would you buy yourself time

if you couldn't pay someone back? Start selling the drugs that you have in your house? I'm sure they got a lot. So Sam, he's determined to soldier on. He's trying to raise money to make up for the shortfall. And initially it seems like he might be able to sell FTX to Binance. However, in a brutal reversal, just one day after the sale is announced, Binance goes back on the deal. They say that further research has led them to discover FTX's issues are beyond our control

or ability to help. Yeah, it's like they showed up to a fire and realized they didn't have enough water, so they added gasoline to it. Yes. In public, SBF tries to reassure customers they'll be able to get their money back. He's not wearing a suit, maybe? He just goes to a press conference with a suit and everyone's like, wait, what? This must be serious.

On November 10th, he writes a very long thread on Twitter in which he admits that there are issues but asks customers not to worry. He also says, I'm sorry, we are where we are, which sucks. And then he ends the thread with this statement in all caps, not advice of any kind in any way. I was not very careful with my words here and do not mean any of them in a technical or legal sense. I may well have not described things right.

So his lawyer like fought the phone out of his hands and quickly tweeted that. Like where did that come from? The next day, less than two weeks after the CoinDesk article was published, FTX declares bankruptcy. SBF resigns as CEO of FTX. And Sam says his net worth has been reduced from billions of dollars to just tens of thousands of dollars. Oh, no.

Excuse me while I get out the world's tiniest violin. SBF is replaced as CEO by JR3, aka John Ray III, who oversaw Enron after that company collapsed due to fraud. And Ray says, quote, never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here? This man is basically the Michael Jordan of cleaning up fraud. So when he says that FTX is the worst mess he's ever had to deal with, that means this is like a big, big mess.

It's almost a success if you think about it. If you're going to run a giant failure, you might as well be the best at it. The best one. Yeah. It's like JoJo Siwa just got the most disliked music video of the year. And she's like, well, I'm the only one that can say

I beat Taylor Swift in something. See? That's beautiful. That's it of a spin. Yeah. Well, after doing all the math, it looks like FTX owes its creditors $8 billion. And if that and bankruptcy weren't bad enough, on November 14th, Bloomberg reports that federal prosecutors in Manhattan are investigating the possibility that FTX engaged in criminal

activity. So this is no longer just a career setback for SBF. This is like real legal trouble. And legal trouble is particularly bad for Sam because if he winds up in court, he'll actually have to wear a suit and tie. If he ended up being guilty, he can end up as president of the United States. So you never know.

You never know. Well, as all of this is going on, instead of keeping quiet and not saying things that might get him in more trouble, Sam keeps trying to put a good spin on things. And just four days after FTX declared bankruptcy, SPF slides into a reporter's DMs to answer questions. And here are some key quotes. Sometimes life creeps up on you. Wow. I didn't realize the full size of it until a few weeks ago.

And I fucked up big, multiple times. And I fucked up. Big. Multiple times. How do they have all that money and no one hires a publicist? You could have gone by all these tweets, these horrible DMs if you just hired a decent publicist. So on November 30th, Sam calls in from the Bahamas to do an interview with Andrew Ross Sorkin of the New York Times. Maybe things have calmed down a little bit by then. Let's take a look at a clip. One of the letters I got, I want to read to you, Sam, because it's from a gentleman who said that he lost his life savings. And the subject line is Sam Bankman Fried stole $2 million from me. Says Andrew, can you please ask SPF why he decided to steal my life savings?

That's a nice question. He looks like he's being yelled at by his parents for taking cookies out of the cookie jar. Like he just has that, like his shoulders are slunk and he's looking down and he's, whoa, it's me. It's really beautiful to see. If you were making international headlines and you got asked the question, why did you decide to steal my life savings?

How would you respond? I'll be like, man, I was in a polyamorous relationship doing, I don't know. And I don't know, man, I was in a polyamorous relationship doing, I don't know. And I don't know, man. That's what happened. I never got to celebrate a birthday. So, I mean, it's rough and Sam does not have good answers, but next time he'll definitely nail it.

A little over two weeks later, ABC airs an interview with SBF. And here's a clip. Let's see how it goes. Did you know that FTX deposits were used to pay off Alameda creditors? Wow. It's buffering. It's buffering. I don't know of FTX deposits being used to pay off Alameda creditors. Wow.

This guy talked his teachers into giving him a good grade? I want to see the footage of that because he's not pulling it off here. Also, how was he shocked by that question? What did you think they were going to ask you during this interview? Where do you get your t-shirts? Yeah. Well, who does your hair? What were you expecting that day?

Well to cap things off, less than two weeks later, on December 12th, he does an event on Twitter Spaces and Sam confidently predicts that he will not be arrested saying, quote, I don't think I will be arrested. Any guesses what happens just a few hours later? He gets arrested. Ding, ding, ding. Sam is not the only one in trouble. Caroline is also looking at multiple charges

of fraud and conspiracy. All of this has happened in less than a month and a half. Sam is arrested by the authorities in the Bahamas. He's brought back to the U.S. and is allowed to go free on a $250 million bail, but the judge orders him to remain at his parents' house. Imagine, not only do you have to move back in with your parents, but you're legally not allowed to leave. No.

Oh man, and no Christmas, no celebration, no birthdays again, back to that. None of it. Going to jail or moving back in with your parents, what's your pick? I think going back with the parents would be worse because my mom, she would treat me like I just got suspended from school, she's like, all right, well, you're back here,

but you're not watching TV. Like, it's no wifi privileges. I don't wanna see you in the kitchen. So it's gonna be, it's double punishment. Yeah. Definitely jail. I mean, 100% jail is a new experience, you know? I think the upside is like, yeah,

you're gonna make new friends. I don't know, It sounds more fun. Yeah. Well, Sam is indicted for money laundering, fraud, and campaign finance violations. He's accused of misusing funds to buy properties in the Bahamas and to make political contributions. But Sam pleads not guilty. When the case is brought to trial, the star witness for the prosecution winds up being Caroline.

Wow. Wow. AKA Sam's on and off lover, who can tell the jury about everything from the financial fraud she witnessed to the drama in their polycule. Caroline, looking at 110 years in prison herself, agrees to testify against Sam. On the stand, Caroline talks about their relationship and says Sam instructed her to falsify balance sheets. Worst of all, she claims that SPF's whole, schlubby guy who always wears the same clothes

thing is just an act. He never really wanted to wear those clothes, he was just doing it to keep a down-to-earth image. Although that does solve the mystery of why anyone would have a shorts and t-shirt guy in their polycule. So he was, he was learned from Adam Sandler. That is the down-to-earth look. That theory was real. Yeah.

Well, Caroline tears up on the stand during her testimony. How does Sam react to his ex crying on the stand and calling him out in public? After Caroline's testimony, one of the prosecutors complains to the judge about Sam's reaction, saying he's shaking his head and laughing. Hey bro, that looks bad to a jury. Anyway, how long do you think it took the jury

to reach a verdict? I don't think they went into the room. I think they just did it right there and they're like guilty the entire time. It took less than five hours. Paperwork alone takes a few hours. So it was incredibly quick. SBF is found guilty on seven counts of fraud

and conspiracy and he's sentenced to 25 years in prison, and all told, he took $8 billion from FTX users. Wow. He's coming out of jail, how old? I mean, he can start again, probably, and do another scam? Probably. Yes. Probably, because FireFest 2 is upon us. So...

So, most likely. Well, let's do a little where are they now? FTX is still undergoing bankruptcy proceedings, but ironically, because the price of crypto kept going up, FTX now believes it will have enough funds to repay most of its customers. Oh, there's almost a happy ending there. That's nice. Yeah, that's good. Zheng Pengzhao was also sentenced to prison time for something completely unrelated.

He pled guilty to facilitating money laundering at Binance and was sentenced to four months in prison. So I guess it's tough to be a CEO of crypto exchange these days. Caroline Ellison is still waiting to be sentenced for her own role in the case. In addition to testifying, prosecutors required her to plead guilty to seven counts of fraud and conspiracy, though because of her cooperation, it's likely her sentence will be less harsh than SBF's. SBF is still in prison serving that 25-year sentence.

However, he is appealing the ruling in his trial. He was also required to forfeit $11.02 billion of his assets. However, with good behavior, he may be able to cut some time off his sentence. And speaking of cuts, it was recently reported that Sam was seen in prison trading mackerel for a haircut. Wow. Once a traitor, always a traitor. Am I right?

And he's dating Elizabeth Holmes or something like that? LAUGHS Yeah. So here on The Big Flop, we try to be positive people and kind of end on a high. So are there any silver linings that you can come up with that came about from SBF and FTX? I would say, like, even though he did these horrible things, he was wildly optimistic the entire time.

And I think that's something we could all use in our own lives, because there's no way we're doing anything near as evil as what that guy did. And he just kind of bounced through life, living it. Maybe we can all do that too. Nice, love that. Wow, that's kind of good. I think that the upside of all this is like,

we all learn that when someone is trying to portray himself as a normal person, that's bad. If you are a millionaire, you have to dress like a millionaire. So I feel like that's my lesson here. It's like always follow stereotypes about people. stereotypes about people. Alright, I think it is good that it seems like FTX will be able to pay back the people who lost their money. We don't have to hear quite so much about cryptocurrency. People want to kind of lay low for a little bit after this. That's nice.

And Larry David got a Super Bowl gig, so good for him, I guess. He needed the money, clearly. Hehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehehe He needed the money, so now that you both know about Sam Bankman Fried and FTX would you consider this a baby flop a big flop or a mega That will go for mega flop too. Yeah. Also, it was a swift fall from heaven for him. A month and a half. Yeah. Bernie Madoff made it like, what, two, three decades? Like, he was running that Ponzi scheme for a while, living high on the hog. And this is what happened with this TikTok billionaire. They just like go down as quick as a reel.

Yeah, as the algorithm lets you. Yeah. Well, thank you so much to our guests, Zoltán Cazas and Fabrizio Copano, for joining us here on The Big Flop. And thanks to all of you for listening. If you're enjoying the show, please leave us a rating and review. And if you just can't get enough of billionaire flops, check out our episodes on Elizabeth Holmes and Elon Musk. We'll be back next

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