The Bloomberg reporters behind the podcast series Spellcaster: The Fall of Sam Bankman-Fried are here to answer your questions about the unraveling of his crypto empire. AMA!

is bloomberg complicit in making SBF into a media darling, and perpetuating his status as a young altruistic genius during the big fraudulent bullrun?

I think without question media coverage of SBF played into his rise, and Sam was incredibly effective at positioning himself and his story for the press. This has happened before of course--I'm old enough to remember when Enron was seen as one of the best run companies in America. At Bloomberg we spent a lot of 2022 chasing tips/rumors/sources about ways that SBF either wasn't living up to his promises and about potential financial issues at Alameda. In September, Hannah and Annie were the among first to raise questions about the connections between FTX and Alameda, and to realize that SBF's claims about them being separate were BS. Here's that story, in case you're curious.

-- Max Chafkin

Same question as all frauds (Madoff, Enron, you name it...)

The red flags were there. They were 14:1 debt to equity, arbitrarily spending cash on houses and terrible investments, and handling billions of dollars as day traders.

How come NO ONE brought this up before?

Yes, exactly! The crazy thing about Sam Bankman-Fried is that with many of the things that were red flags, he was able to turn into perceived advantages. You'd think that a guy who couldn't bring himself to wear hard pants would be a tough sell to investors -- but Sam sort of managed to tap into people's stereotypes about Silicon Valley genius. There's a VC in the podcast who talks about this in some detail. Part of the problem is that VCs are looking for outliers, so it's really easy to mistake a red flag for evidence that somebody is a noncomformist and therefore maybe a good bet.

And then the money helps reinforce the narrative. In January 2022, FTX raised $400 million at a $32 billion valuation, which made it look like the company was flush with cash.

This is a problem that comes up all the time in Silicon Valley. See also: Theranos, especially.

-- Max Chafkin and Hannah Miller

What do you know about the "tokenized stocks" they were trading? they were supposed to be backed 1:1 with the underlying security but in reality FTX never purchased anything. Still waiting to hear about some kind of punishment for blatant fraud. But instead all I hear is talks of them re-opening

FTX capitalized on a trading hysteria that wasn't limited to just crypto markets. GameStop, the poster child of the "meme stock" movement, entered a partnership with FTX shortly before the exchange's bankruptcy. In crypto sometimes the line blurs between more "traditional" markets and virtual currency markets.

Bankman-Fried promoted the notion that token versions of stocks could be an appetizing 24/7 tool.

Even though an investor might've interpreted buying a synthetic share of Apple as akin to buying Apple stock -- those two things (and the protections available) are very different.

-- Annie Massa

Did you, either before you started investigating this or during, ever invest in crypto yourselves?

I personally haven't, and newsrooms like ours have prohibitions on owning stocks, trading options, doing short term trading, etc, to avoid potential conflicts. Same goes for investing in crypto.

One of my first exposures to crypto was that a relative had to buy Bitcoin at an ATM in order to pay off a ransomware hacker who was holding her personal photos and documents hostage. She did not get them back even after paying the ransom, so I was sketched out by it. However, her experience taught me a lot about how crypto works and its challenges--she did have some Bitcoin left over, but lost her private keys, so can no longer access it. These kinds of complications can help explain why people gravitated towards exchanges like FTX, which claimed to make crypto easier to use and access for mainstream customers.

-- Hannah Miller

Did you ever confirm Caroline‘s tumblr to be authentic? Especially as allegedly she posted material that was racist.

We did confirm the tumblr, which had certain identifying details, to be authentic. Some of the material was troubling and did paint a vastly different picture from how people close to Caroline viewed her. We may get more insight into Caroline in Bankman-Fried's trial--the prosecution reportedly has a diary of hers that is being used as evidence.

-- Hannah Miller

Across all of FTX and Alameda, how many people do you think knew what they were doing was completely illegal and fraudulent? Could most of the employees have guessed, or was it well-hidden?

That's ultimately a question for prosecutors. But our reporting shows things were kept close among a tight group within FTX and Alameda, so it may have been difficult for lower-level employees to realize what was going on. In the podcast, you'll hear from people who said they were working hard to build something that they believed would generate money for good causes.

We do know that there were several high-profile exits in the months leading up to FTX's collapse. Sam Trabucco, the co-CEO of Alameda, stepped down in August, and Brett Harrison, the President of FTX US, left in September. Harrison told us on the podcast that he had concerns over how things were being run at FTX.

Of course, several people close to Bankman-Fried, including Caroline Ellison and a couple other top execs, have pleaded guilty and appear to be cooperating with authorities.

-- Hannah Miller

How weird did Caroline Ellison and SBF’s relationship get?

Depends on your definition of weird. Many people would argue that a romantic relationship that ends in one partner turning state’s witness against the other could be considered weird! A lot of details about the “polycule” at FTX flew around following the exchange’s collapse. We do know that personal and professional relationships were often blurred at FTX--Sam dated other coworkers aside from Caroline. Other executives were in relationships with colleagues as well.

Our reporting also reflected that FTX Bahamas team spent a lot of time on relatively boring stuff like work and board games. But romantic relationships among team members there were part of the picture too.

-- Annie Massa and Hannah Miller

What do you think is in store for the future of cryptocurrency?

There are still a lot of questions over what the best use case is for crypto and blockchain. There are still new startups in the space and investors willing to back them--many in the industry believe that this crypto winter will pass. In other parts of the world, including the UK, the EU, Singapore, the UAE and Hong Kong, legislation is being passed and developed to provide a regulatory framework for the industry, so we've seen some companies look to broaden their business in those places.

-- Hannah Miller

What regulations do you think may help in the future to avoid companies like FTX from committing this kind of fraud? Was it crypto being unregulated that made it easy, or was it just run of the mill fraud?

This is a major question in DC right now -- and all around the world. The crypto market is global and 24/7, but it’s regulated to varying degrees of rigor in different countries. The FTX debacle highlights how those gaps can be used to a company's advantage -- US regulators didn’t come down hard on FTX until after a lot of damage had already occurred. The exchange also successfully harnessed a "get rich quick" mentality that pervaded as crypto markets were rallying.

We should also add that while Bankman-Fried is accused of fraud, he has not been convicted of a crime. His associates Caroline Ellison, Gary Wang, and Nishad Singh have pleaded guilty to federal charges. But FTX is a case study in some of the questions that regulators globally are weighing when it comes to crypto markets.

-- Annie Massa

What made you each interested in studying/following crypto in the first place?

I had first learned about blockchain in college after reading some white papers and eventually had a job as a reporter covering the life insurance industry. It wasn't the most interesting beat to me, but I ended up writing a bit about crypto after MassMutual bought $100 million worth of Bitcoin! I ended up taking my clips and applying to a crypto reporter job.

-- Hannah Miller

Honestly, because it's weird. Full of promise, but also full of sketch -- with tons of real money on the line.

-- Max Chafkin

Thanks for joining our AMA on the rise and fall of Sam Bankman-Fried and his crypto exchange, FTX.

You can listen to our full podcast detailing SBF, FTX and his trading firm Alameda Research, and interviews from people in his inner circle in our podcast called Spellcaster: The Fall of Sam Bankman-Fried, or get more crypto insights here.

-- Hannah Miller, Annie Massa and Max Chafkin

Do you guys ever go on lunch dates with Joe and Tracy from the odd lots podcast or is everyone siloed? I want to imagine that Bloomberg is like sports center from espn and you work in an office with economists instead of mascots and everyone goofs around all the time.

If it is not like that, please don’t respond. I don’t want my podcast fantasy ruined.

Who says we don't have mascots.