SORKIN: But there have been individuals who were telling you that you just needed more compliance, no?
BANKMAN-FRIED: There have been, but I believe compliance — we were spending an unlimited amount of our energy on compliance. We were spending an unlimited amount of energy on regulation, on licensure. We were getting licensed in dozens of jurisdictions. I, I believe, frankly, we’re spending probably an excessive amount of of our energy getting licensed on reflection.
You recognize, there have been some places where I believe that the reporting and transparency obligations from that licensure actually did help. I believe once you have a look at I mean, FTX U.S. derivatives. Once you have a look at FTX Japan, which I believe is fully solvent, which I believe could make all customers whole tomorrow if the teams were to permit it to. I’m confused why it hasn’t. But you understand, I believe that a number of what we ended up doing and specializing in was a distraction to some extent from one unbelievably essential area that we completely failed on. And that was risk. That was risk management. That was customer position risk. And albeit, conflict-of-interest risk. And you understand, there, there was no one that was chiefly accountable for positional risk of consumers on FTX. And that feels pretty embarrassing on reflection because that was, you return to 2019, even 2018, ask me, why am I beginning to construct out FTX? What’s the purpose of it?
And what I’d have said was, look, existing crypto derivatives exchanges have large risk-management failures, that day-after-day there are thousands and thousands of dollars which can be being lost by customers due to risk-management failures, that these contracts are paying out 75 cents on the dollar week after week after week due to risk-management blowouts and that, that should be overhauled. And that was what I used to be focused on for the start of FTX. I used to be not focused on that for the last yr or two. I got less grounded from that, and I began specializing in the larger picture on, on known future business avenues, on, on licensure, on a number of things. And I mean we, we lost track of a extremely essential a part of the business and of the product. And so there absolutely were management failures, huge management failures. I bear responsibility for that. There have been oversight failures, transparency failures, reporting like so many things we should always have had in place. I believe that a number of it was on the risk-management side.
SORKIN: Let me ask you about that. We had Larry Fink here today, and he had a stake in FTX. And Sequoia, Paradigm, very big enterprise capital firms had given you money. I’m curious in the event that they ever asked you questions on this risk management. Whether or not they bear any responsibility?
BANKMAN-FRIED: I don’t think they bear responsibility. Put yourself within the eyes of an investor, a enterprise capital firm, what you’re fascinated with primarily is upside. What you’re fascinated with primarily is investing in a personal company and considering, “Might this 3X, might this 5X, might this even 10X within the upside cases?” And yeah, there’s some probability that it’d go down, some probability it’ll go all the way down to zero, however it’s counterbalanced by the upside propositions here. Most of what they were focused on was, I believe, what might FTX develop into, what’s the pathway to get from here to there. What wouldn’t it take? What are the missing pieces? At the purpose where you might be dwelling on all of the varied precise downside scenarios and risks for a prospective enterprise investment, which means you aren’t investing. If that’s where your head is at, and you think that the chances are that’s where you’ll find yourself, why would you do this investment?
SORKIN: Can I ask you in regards to the drugs? You’ve tweeted about it, Caroline has tweeted about it. Others have tweeted about uppers and downers and all styles of things. There have been pictures taken of something called Emsam, which apparently increases levels of dopamine to the brain. It’s actually for Parkinson’s. Were you taking that? It’s a patch.
BANKMAN-FRIED: It’s funny hearing this. I had my first sip of alcohol after my twenty first birthday. I believe I perhaps have half a glass of alcohol a yr, roughly speaking. There have been no wild parties here. Once we had parties were we played board games. Twenty percent of individuals would have 1 / 4 of a beer each or something like that, and the remainder of us wouldn’t drink anything. I didn’t see any illegal drug use on the office or at these parties. And once I say parties, I mean having people over for dinner, that’s what that meant.