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What to know about Sam Bankman-Fried and FTX before his crypto financial fraud trial

AILSA CHANG, HOST:

Disgraced FTX founder Sam Bankman-Fried stands trial this week in New York City. He's accused of orchestrating one of the largest financial frauds in history. Customers and investors lost billions of dollars investing on his cryptocurrency exchange, which was once valued at $32 billion. Bankman-Fried has maintained his innocence throughout FTX's implosion. Here's what he said shortly after his crypto empire crumbled in 2022.

(SOUNDBITE OF ARCHIVED RECORDING)

SAM BANKMAN-FRIED: I didn't ever try to commit fraud on anyone. I was excited about the prospects of FTX a month ago. I saw it as a thriving, growing business. I was shocked by what happened.

CHANG: Our colleague David Gura spoke with Bloomberg reporter Zeke Faux, who's written a new book called "Number Go Up: Inside Crypto's Wild Rise And Staggering Fall." And he asked Faux what made SBF so appealing to would-be investors that they happily gave him hundreds of millions of dollars to grow his company.

ZEKE FAUX: He had this way of being kind of disrespectful in a way that just made everyone love him more. No matter the occasion, he'd wear khaki shorts, an FTX T-shirt, never combed his hair. And he actually played video games during important meetings, which you'd think might be kind of a turnoff. But when Sequoia, the venture capital firm, found out that Sam had been playing League of Legends while pitching them, their reaction was just like, oh, my God, we love this guy. How do we give him hundreds of millions of more dollars?

DAVID GURA, BYLINE: This became, like, a shtick of his. You write about it in the book. He's giving a speech, a major speech to an audience in New York. You're there with him, and you watch this happen. He opens up a video game, and he starts playing.

FAUX: Yeah. I mean, it's just bizarre. Not only is he giving this speech to The Economic Club of New York - like, pretty important group - he is playing video games while he does it. And he knows that I'm sitting there writing a profile of him that I'm going to describe him doing this. And I think he saw that this image as, like, the kind of cool nerd who didn't care about the traditional powerbrokers and couldn't be bothered to dress up or to even give someone his full attention was working for him. And for a while, it totally did.

GURA: Zeke, it sounds like he was kind of curmudgeonly. You describe him kind of, like, tuning out and playing video games. Yet you also got swept up in the mystique surrounding him. I flew past the bright red flags, you write. What were some of the other red flags, and how did you end up missing them?

FAUX: The biggest one was just that FTX was in the Bahamas. They'd moved there to avoid U.S. regulation. So this guy that we were all hyping as the future of finance was basically running, like, a semi-legal offshore casino for crypto where you could make all sorts of crazy bets on random coins. The other big red flag that everyone knew about, which we should have all paid more attention to, was that Sam ran this crypto exchange FTX, but he also ran a hedge fund called Alameda that was one of the biggest traders at the exchange. It's a big conflict of interest that never would have been allowed on Wall Street. And Sam would always say, Alameda plays by the same rules as everyone else on FTX. They're not cheating. They're not granted every - any special privileges. But we've now found out that was totally not true.

GURA: There's a tendency to talk about the big fish in this world. Sam Bankman-Fried was once a billionaire, so were all of the people who surrounded him in the executive ranks at his companies. But a lot of regular folks lost money here, and we don't talk about them a lot. When you look at what happened to FTX, how big an impact did that have on people who aren't billionaires and don't have penthouses in the Bahamas, who took a gamble on this new asset based, perhaps, on an ad that they saw during the Super Bowl?

FAUX: I spoke with lots of people who got sucked in by that kind of marketing - maybe started small, but then ended up sending hundreds of thousands of dollars of their savings to one of these crypto apps. And for them, the collapse had a real impact. I talked to people who were now unable to buy homes that they'd been saving for or would have to seek new lines of work. Yeah, it was not all, like, fun and silliness. People lost real money, and their lives were changed by, you know, the collapse of these platforms like FTX and of all the coins that went along with it.

GURA: You know, Zeke, I think you and I would both agree this is going to be a pivotal signal moment in the story of crypto. You've spent years covering cryptocurrency. Do you see this as the end of a chapter, or do you think that we are approaching the end of the story of crypto?

FAUX: So in my time researching crypto, I spent two years trying to essentially answer the question of, what is this all good for? Why are all these coins going up and up? And what I found is that there's not much there. And the one thing that it was good for was gambling. And now, with the collapse of FTX, Sam Bankman-Fried has discredited even that use. So I just can't imagine that after all this, we're going to see the crypto bubble inflate again.

CHANG: That was Bloomberg investigative reporter Zeke Faux with NPR's David Gura. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.