Oct 17, 2023 - Economy

The eight balance sheets of Sam Bankman-Fried’s hedge fund

Data: Trial evidence courtesy of Molly White; Chart: Erin Davis/Axios Visuals

Sam Bankman-Fried, the former crypto billionaire currently being tried on 13 counts of fraud in a Manhattan criminal court, took great care over exactly how he lied to his lenders, per testimony last week.

Why it matters: The revelations make it very hard for Bankman-Fried to make the case that he had simply taken his eye off the ball and wasn't aware of how customers' money was being misused.

Driving the news: Bankman-Fried rejected seven different iterations of the balance sheet at his hedge fund, Alameda Research, before he alighted upon one that he felt comfortable showing to lenders, per the sworn testimony of then-CEO of Alameda, Caroline Ellison, the person who drew the spreadsheets up.

Why it matters: The final version — "alt 7" — is arguably the vaguest, and notably omits any mention of related-party loans (on the asset side) or "exchange borrows" (on the liability side).

  • Both would have been red flags to outsiders — related-party loans because a hedge fund shouldn't be lending billions of dollars to its own executives, and exchange borrows because Alameda was not supposed to be able to borrow anything at all from FTX, the exchange in question.

The big picture: A real balance sheet is not something that should ever be massaged — let alone to the point at which one version can show $5 billion in liabilities while another shows $15 billion.

Between the lines: The one thing that's constant in all eight spreadsheets is the difference between the assets and the liabilities — the net asset value. That's always exactly $6.168 billion.

  • In turn, that gives the clear impression that Ellison was starting with a preordained answer, and then making multiple attempts to reverse-engineer a plausible way of getting there in a way that wouldn't alarm Alameda's counterparties.

💭 Our thought bubble: None of these spreadsheets can really be considered a true balance sheet — one that an accountant would recognize as such. Even the "main" sheet is likely more fiction than fact. Still, the sheer number of versions — and the massive differences between them — sure look like evidence of fraudulent intent.

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