I tried, in the previous section, to capture the horrors of FTX’s balance sheet as it spiraled into bankruptcy. But, as I said, there is something important missing in that account. What’s missing is the money. What’s missing is that FTX had at some point something like $16 billion of customer money, but most of its assets turned out to be tokens that it made up. It did not pay $16 billion for those tokens, or even $1 billion, probably. 7 Money came in, but then when customers came to FTX and pried open the doors of the safe, all they found were cobwebs and Serum. Where did the money go?
I don’t know, but the leading story appears to be that FTX gave the money to Alameda, and Alameda lost it. I am not sure about the order of operations here. The most sensible explanation is that Alameda lost the money first — during the crypto-market meltdown of this spring and summer, when markets were crazy and Alameda spent money propping up other failing crypto firms — and then FTX transferred customer money to prop up Alameda. And Alameda never made the money back, and eventually everyone noticed that it was gone.
Levine then suggests six possible explanations for where the money went, one of which is about EA:
FTX/Alameda were funneling customer money into effective altruism. Bankman-Fried seems to have generously funded a lot of effective altruism charities, artificial-intelligence and pandemic research, Democratic political candidates, etc. One $500 million entry on the desperation balance sheet is “Anthropic,” a venture investment in an AI safety company. At that same Bloomberg Crypto Summit, I asked Bankman-Fried 9 : “You are sort of in the business of funneling money from people who are going to use it poorly on gambling to, like, animal charities and pandemic preparedness and Joe Biden. Is that too cynical a view, or is that not cynical at all, or what?” My question assumed that FTX and Alameda made a lot of money on fees and spreads from running a crypto exchange and market-maker, so they were legitimately taking money from gamblers and using it for charity. But “not cynical enough” might have been the correct answer. 10
This quote raises the key question I think:
Levine then suggests six possible explanations for where the money went, one of which is about EA: