SORKIN: But there were people who told you that you needed more compliance, didn’t they?
BANKMAN ROAST: There were, but I think compliance — we spent an enormous amount of our energy on compliance. We spent an enormous amount of energy on regulation, on licensing. We got licenses in dozens of jurisdictions. I honestly think that in hindsight we probably spend too much of our energy trying to get a permit.
You know, there were some places where I think the reporting and transparency obligations of that licensure really helped. I think if you look at I mean FTX US derivatives. If you look at FTX Japan, which I think is fully solvent, which I think could make all customers whole tomorrow if the teams allowed it. I’m confused why it didn’t happen. But you know, I think a lot of what we ended up doing and focusing on was to some degree a distraction from an incredibly important area where we completely failed. And that was risk. That was risk management. That was customer position risk. And frankly, the risk of conflict of interest. And you know, there was no one primarily responsible for client positional risk on FTX. And that feels pretty embarrassing in retrospect because that was, go back to 2019, even 2018, ask me, why am I starting to build out FTX? What’s the point?
And what I would have said was, look, existing crypto derivatives exchanges have major risk management flaws, that millions of dollars are lost every day by clients because of risk management flaws, that these contracts pay out 75 cents week after week after week on the dollar because of risk management blowouts and that needs to be reviewed. And that’s what I focused on before the start of FTX. I wasn’t focused on that for the past two years. I became less grounded as a result and started focusing on the bigger picture, on known future business avenues, on licensure, on a lot of things. And I mean, we’ve lost track of a really important part of the business and the product. And so there were definitely management mistakes, huge management mistakes. I bear responsibility for that. There were oversight deficiencies, transparency deficiencies, reporting like so many things we should have had. I think a lot 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, really big venture capital firms had given you money. I wonder if they ever asked you questions about this risk management. Do they bear any responsibility?
BANKMAN ROAST: I don’t think they are responsible. Put yourself in the eyes of an investor, venture capital firm, what you think about in the first place is positive. What you think about in the first place is investing in a private company and thinking, “Maybe this is 3X, maybe 5X, maybe even 10X in the positives?” And yes, there’s a chance it will go down, a chance it will go to zero, but it’s offset by the positive proposals here. Most of what they focused on, I think, was what could become FTX, what’s the road to get from here to there. What would it take? What are the missing pieces? The moment you consider all the different precise downside scenarios and risks for a future venture investment, it means you are not investing. If that’s what your head is looking for, and you think there’s a good chance you’ll end up there, why make that investment?
SORKIN: Can I ask you about the drugs? You tweeted about it, Caroline tweeted about it. Others have tweeted about uppers and downers and all sorts of things. Pictures have been made of something called Emsam, which apparently increases the amount of dopamine in the brain. It’s actually for Parkinson’s. Did you take that? It’s a plaster.
BANKMAN ROAST: It’s funny to hear this. I took my first sip of alcohol after my 21st birthday. I think I drink about half a glass of alcohol a year. There were no wild parties here. When we had parties, we played board games. Twenty percent of people would drink a quarter beer each or something like that, and the rest of us wouldn’t drink anything. I saw no illegal drug use in the office or at these parties. And when I say parties, I mean people come to eat, that’s what it meant.
