The staggering level of apparent deception staged by former crypto king Sam Bankman-Fried was not uncovered by government investigators or a major financial news organization such as The Wall Street Journal.
Instead, the public’s first glimpse of the alleged wrongdoing by Bankman-Fried — known to insiders as SBF — came earlier this month from a small news website unknown to much of the public that has spent years chronicling the turbulent and murky world of crypto: CoinDesk.
In fact, the reporter and editor duo working to break the story, which led to an astonishing cascade of events that led to the evaporation of billions of dollars, didn’t realize the scoop they had on their hands when they first got a document that casts huge doubt on the stability of SBF’s crypto-empire.
“Hey Nick,” reporter Ian Allison emailed editor Nick Baker about his original story plan, according to a copy of the message I was sent, “I’m looking at some things to do with Alameda if you want to chat this week , no mad rush.”
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Allison had obtained a financial document that showed 30-year-old SBF had engaged in shady behavior to use his crypto firm, FTX, to support his separate investment company, Alameda. But it wasn’t clear at first glance, and it took “a couple of days to figure out the story,” Baker recalled to me in a phone call this week.
Baker said both he and Allison “knew it was an important document to have,” but emphasized that the two had no understanding at first of the massive history buried in the spreadsheet of numbers.
“Did I know I’d be talking to you today? Hell no,” Baker told her honestly. “I had no idea it was going to be this gigantic.”
Over the next few days, Baker, from a home office in New York, worked with Allison, who lives in Scotland, to “chisel down” the financial document into a story. On November 2, they hit the public with the explosive report, quickly capturing the attention of the crypto world and shaking the foundations of the mighty exchange FTX. SBF, the prolific tweeter, was noticeably silent.
“It was something that struck us all internally,” Baker recalled to me. “Sam, when there’s a big story about him, he’s not shy about tweeting it. And his silence was deafening. That was one of the things that surprised us in the days that followed. That he didn’t say anything. ”
This silence was probably because SBF knew that CoinDesk had revealed something big. And he had good reason to believe that. The article cast enormous doubt on FTX’s health, spurring an effective rush by investors to suddenly withdraw funds from the company, putting its solvency at risk.
After the scoop, SBF’s main competitor, Binance, suggested it would rescue the company through an acquisition. But in another major scoop that led to FTX’s implosion, Allison learned that the crucial deal wasn’t going to happen. Baker said it was releasing the story that he knew would “wreak havoc and destruction” on the crypto world that made him anxious.
“I was nervous,” Baker said. “It was definitely cold hands [moment] – not because I thought so [the scoop] was wrong, but because I knew it was right. I knew the pain ahead. Telling a true story has consequences.”
Soon after, with the crypto market and his company in chaos, SBF resigned in disgrace and FTX moved to declare bankruptcy, marking one of the most stunning collapses in financial history.
“There are few parallels for a story of such impact — and such rapidity,” Baker said, noting that FTX’s undoing happened at a much higher rate than that of companies like Enron. “We dropped the story and in a week and two days they’re bankrupt and this leading figure in crypto has fallen. It’s amazing. Really breathtaking. I’ve never seen anything like it.”