The staggering level of apparent deception staged by former cryptocurrency kingpin Sam Bankman-Fried has not been uncovered by government investigators or a major financial news organization, such as the Wall Street Journal.
Instead, the first glimpse of Bankman-Fried’s alleged wrongdoing — known to insiders as SBF — came earlier this month from a small news site unknown to much of the public that has spent years reporting on the turbulent and murky world of cryptocurrencies: CoinDesk .
In fact, the reporter and editor duo who worked to break the story, which set off an extraordinary cascade of events that resulted in billions of dollars evaporating, didn’t realize the scoop they had in their hands when they got for the first time a document that has cast huge doubts on the stability of the SBF crypto empire.
“Hi Nick,” reporter Ian Allison emailed editor Nick Baker about his initial story plan, according to a copy of the message I was provided, “I’m looking at some things to do with Alameda if Want to chat this week, no mad rush.”
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Allison had obtained a financial document showing SBF, 30, had been shady to use his cryptocurrency firm, FTX, to shore up his separate investment firm, Alameda. But it wasn’t clear at first glance, and it took “a couple of days to figure out the story,” Baker reminded me in a phone call this week.
Baker said both he and Allison “knew it was an important document to have,” but stressed that the two didn’t initially understand the huge story that was buried in the spreadsheet of numbers.
“Did I know I was going to talk to you today? Hell no,” Baker told me candidly. “I didn’t expect it to be so gigantic.”
Over the next two days, Baker, from a home office in New York, worked with Allison, who lives in Scotland, to “sculpt” the financial document into a story. On Nov. 2, they released the explosive report, quickly capturing the cryptocurrency world’s attention and shaking the foundations of the mighty FTX exchange. SBF, the prolific tweeter, was remarkably quiet.
“It was something that affected us all internally,” Baker reminded me. “Sam, whenever there’s a great story about him, he’s not shy about tweeting it. And his silence was deafening. This was one of the things we were surprised by in the following days. That he didn’t say anything.
That silence was likely because SBF knew CoinDesk had uncovered something big. And he had good reason to believe it. The article generated huge doubts about FTX’s health, prompting an effective rush by investors to suddenly withdraw funds from the company that endangered its solvency.
Following the scoop, SBF’s main competitor, Binance, hinted that it would bail out the company through an acquisition. But in a second major scoop leading to the implosion of FTX, Allison learned the crucial deal was not going to happen. Baker said he was publishing that story, which he knew would “wreak havoc and destruction” in the cryptocurrency world, which made him anxious.
“I was nervous,” Baker said. “It was definitely a cold in the hands [moment] – not because I thought [the scoop] it was wrong, but because I knew it was right. I knew the pain that awaited me. Telling a truthful story has consequences.”
Soon after, with the cryptocurrency market and his company in shambles, SBF resigned in disgrace and FTX decided to file for bankruptcy, marking one of the most stunning crashes in financial history.
“There are few parallels for a story with so much impact — and so fast,” Baker said, noting that FTX’s downfall has come at a much faster rate than companies like Enron. “We dropped the story and within a week and two days they went bankrupt and this leading figure in cryptocurrencies went down. It’s incredible. Truly astounding. I’ve never seen anything like it.”