How a scoop by a little-known crypto site led to the fall of Sam Bankman-Fried and implosion of FTX

By Oliver Darcy, CNN Business

The staggering level of apparent deception staged by former crypto king Sam Bankman-Fried wasn’t uncovered by government investigators or a major powerhouse financial news organization, such as The Wall Street Journal.

Instead, the public’s first glimpse of the alleged wrongdoing by Bankman-Fried — known to insiders as SBF — came earlier this month from a small news site unknown to much of the public that has spent years chronicling the turbulent and murky world of crypto: CoinDesk.

In fact, the reporter and editor duo who worked to break the story, which prompted a stunning cascade of events that led to the evaporation of billions of dollars, didn’t realize the scoop they had on their hands when they first obtained a document that cast tremendous doubt on the stability of SBF’s crypto empire.

“Hi Nick,” reporter Ian Allison emailed editor Nick Baker about his initial story plan, according to a copy of the message provided to me, “I’m looking at some stuff to do with Alameda if you want to chat this week, no mad rush.”

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Allison had obtained a financial document that showed 30-year-old SBF had engaged in shady behavior to use his crypto company, FTX, to prop up his separate investment firm, Alameda. But that wasn’t clear at first glance and it took “a couple days to figure out the story,” Baker recalled to me in a phone call this week.

Baker said that both he and Allison “knew that it was an important document to have,” but emphasized that the two had no understanding at first of the massive story that was buried in the spreadsheet of numbers.

“Did I know that I’d be speaking to you today? Hell no,” Baker candidly told me. “I had no expectation that it was going to be that gigantic.”

Over the next couple of days, Baker, from a home office in the Chicago area, worked with Allison, who lives in Scotland, to “chisel down” the financial document into a story. On November 2, they hit publish on the explosive report, quickly capturing the attention of the crypto world and shaking the foundation of the mighty exchange FTX. SBF, the prolific tweeter, was noticeably silent.

“It was something that struck us all internally,” Baker recalled to me. “Sam, whenever there is a big story about him, he is not shy about tweeting it. And his silence was deafening. That was one of the things we were surprised about in the days after. That he didn’t say a thing.”

That silence was likely because SBF knew CoinDesk had uncovered something big. And he had good reason to believe that. The article generated enormous doubt about the health of FTX, spurring an effective rush of investors to suddenly pull funds from the company which put its solvency in danger.

After the scoop, SBF’s chief competitor, Binance, suggested it would rescue the company through an acquisition. But in a second major scoop that led to FTX’s implosion, Allison learned that the crucial deal would not happen. Baker said it was publishing that story, which he knew would “unleash chaos and destruction” on the crypto world, that made him anxious.

“I was nervous,” Baker said. “It was definitely a cold hands [moment] — not because I thought [the scoop] was wrong, but because I knew it was right. I knew the pain ahead. Telling a truthful story has consequences.”

Soon after, with the crypto market and his company in chaos, SBF resigned in disgrace and FTX moved to declare bankruptcy, marking one of the most stunning collapses in the history of finance.

“There are few parallels for a story with that much impact — and so quick,” Baker said, noting FTX’s undoing occurred at a much greater speed than that of companies such as Enron. “We dropped the story and in a week and two days they are bankrupt and this leading figure in crypto has fallen. It’s stunning. Truly stunning. I’ve never seen anything like it.”

Correction: An earlier version of this story incorrectly identified the location of Baker’s home office. Baker’s office is located near Chicago.

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