FTX Collapse

I think a lot of what was going on here is a trap to which initially successful entrepreneurs are particularly vulnerable, which I call “confusing luck with insight”. Many ventures that succeed, regardless of how innovative their content and hard-working those that create them may have been, did so in part because they happened to have been started at the right time, often not perceived as so by those involved.

For example, if we had started Autodesk two years before we founded the company in 1982, computers which were affordable by those who ended up buying AutoCAD were far too slow and/or limited in graphics capability to do useful work. The company would have run out of money or been abandoned by the founders as “not going anywhere” before capable machines came on the market. If we’d started two years later, in 1984 or 1985, we’d have been faced with a competitive landscape in which the established mainframe and workstation CAD vendors, including IBM, Computervision, and Intergraph, were launching their PC-based products, and a pipsqueak in Marin County with no money to spend on advertising and promotion wouldn’t have had a chance getting into the market.

AutoCAD became a success because it launched at the time the IBM PC and its many competitors created a market which drove down the price of PC-based graphics, meaning a program like AutoCAD could run on a computer our prospective customers could afford. (When I say “run”, that’s “barely run” for the original IBM PC with a Hercules monochrome graphics card. But its performance was sufficient for the early adopters whose purchases allowed AutoCAD to obtain a leading market share and be perfectly positioned when the IBM PC/AT and the many Intel 80286-based clones came on the market in 1984, which were ideal platforms for AutoCAD 2.0 [later retconned as “Release 5”], which is when AutoCAD really “took off” as a mass market product.)

Now, I’m sure some analysts admired how prescient we were to launch AutoCAD at just the right time in the technological and commercial evolution of the personal computer hardware market. But I was there, and we weren’t. Autodesk was founded and AutoCAD launched at the time they were for entirely different reasons (about which I wrote [or compiled] a whole book), and the fortuitous timing was just that—pure dumb luck, and I’ve always appreciated that and tried to avoid thinking we could “do it again” by pure insight and hard work.

Now, how does this apply to financial blow-ups and FTX in particular? It comes down to another of my favourite aphorisms: “In a bull market, everybody is an investment genius”. FTX and the numerous crypto blow-ups which preceded (and will follow) it “matured” during one of the greatest bull markets in human history: Bitcoin’s run from essentially zero (the first recorded commercial transaction in Bitcoin was on 2010-05-22, when Laszlo Hanyecz bought two Papa John’s pizzas for BTC 10,000) to US$/BTC 69,044.77 on 2021-11-10 was a gale force wind in which even turkeys can fly (for a while). In such an environment, even the most foolish “strategies” involving absurd amounts of leverage, un-hedged risk exposure, and speculation in derivative or copycat “assets” seem to work magically, and the FTX folk, the “smartest people in the room” just like their predecessors at Enron, came to believe the profits were flowing from their genius, not raining into their randomly-placed buckets from a once-in-a-generation bull market. As Warren Buffet observed, “Only when the tide goes out do you discover who’s been swimming naked.” Well, the tide went out on FTX.

There may have been fraud, security law violations, and other criminality in FTX’s operations, but it is often the case that the venture was not a criminal enterprise from inception, but rather one whose founders believed was built on a firm foundation rather than wafted in the air by a bull market. The criminality often comes later as the tide starts to go out and increasingly desperate measures are deployed to try to paper over the losses and “trade out of the corner”.

Desperation when the market turns against you is enough to make a fellow confuse shrimp with a vegetable.


Thank you for sharing your perspective - luck vs. chance is an important often under-rated success factor.

Re: FTX, I heard others share the opinion that other segments of the finance industry were skating near or over the border between legal and illegal, and it was only the absence of clear lines that allowed companies to emerge and dominate new sectors. I think there is a Turkish saying that goes along the lines of “the thief who isn’t caught is an honest salesman”.


Here is the full New York Times/DealBook Summit interview on 2022-11-30 of Sam Bankman-Fried by Andrew Ross-Sorkin. The full interview is one hour and 13 minutes.


Interesting poll results on Twitter.



The Financial Times’s “FT Alphaville” has obtained an Excel spreadsheet, produced in early November 2022 when Sam Bankman-Fried was seeking rescue funding during the run on FTX, which detailed the “investments” made by the Alameda “venture capital fund”. The FT notes in “Revealed: the Alameda venture capital portfolio”.

As well as running a crypto exchange that didn’t exchange crypto and owning a hedge fund that didn’t hedge, Sam Bankman-Fried had a venture capital fund that didn’t venture its own capital.

The VC division, in contrast to the rest of the FTX group, can now provide some insight into where some of the money went.

The article presents the spreadsheet in a series of pages, sorted by the size of the investment in descending order. Here is the first page (click to enlarge).

The disparate bundle of nearly 500 illiquid investments is split across 10 holding companies. The total investment value is given on the spreadsheet as in excess of $5.4bn.

Going by the spreadsheet, boundaries between SBF’s companies were blurred. Two of Alameda’s biggest holdings, the crypto miner Genesis and the artificial intelligence research group Anthropic, are also listed on the draft FTX balance sheet published last month by FTAV. (Semafor subsequently reported that FTX had seized certain assets from Alameda after a margin call.)

As previously reported, the portfolio includes stakes in FTX backers Sequoia Capital and Anthony Scaramucci’s SkyBridge Capital, as well as in Elon Musk’s SpaceX and Boring Company projects through the investment in K5.

Of Alameda’s remaining investments, crypto and DeFi projects account for the majority. But the list also includes numerous start-up video game studios and betting platforms, online banks, publishers, a fertility clinic, a military drone maker and a vertical farming company.

Read the whole thing.


Forbes has obtained the complete written statement that Sam Bankman-Fried prepared to submit with his testimony to the U.S. House of Representatives Committee on Financial Services on 2022-12-13, prior to his arrest in the Bahamas, “Exclusive Transcript: The Full Testimony Bankman-Fried Planned To Give To Congress”.

This article is so cluttered with advertisements it summons memories of mid-1990s Web site design.


Unusual Whales has compiled a list, from U.S. Federal Election Commission data, of all of Sam Bankman-Fried (SBF) and FTX’s political “donations” for 2020–2022. Here is a chart of SBF PAC donations, colour coded by wing of the Uniparty.


The linked document includes a CSV database you can extract if you wish to do your own crunching of the numbers.


Relative willingness to return or stated intent to return funds is not very high

Political Party House or Senate Donated No Response Returned or Plan to Return
D H 13 52 10
D S 4 10 3
R H 10 68 4
R S 7 13 2
Grand Total 34 143 19

Though SBF/FTX was less generous towards Rs, it seems that relatively speaking, R recipients are less likely to return or plan to return funds.


I don’t understand the metric. If FTX donated to (only) 34 CongressScum, how can 143 fail to respond to a request for a return of the money?


I believe “Donated” means the recipient of FTX/SBF largesse donated the money to a worthy cause.