As Sam Bankman-Fried trial begins, Aditya Bhardwaj on how he was ‘on the inside & still duped’

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Bharadwaj was in Hong Kong with the rest of his team when they were told that Bankman-Fried — also known as SBF — and his top colleagues had misappropriated funds. 

He didn’t understand the scale of it at the time. 

SBF ran cryptocurrency exchange FTX and trading firm Alameda Research. It was a $32 billion startup that went bust in days. And at the heart of it all is an old-fashioned scam the FTX used customers’ money to make risky investments, and was caught doing it. 

The fraud is up there with some of the largest financial crimes in American history, according to US attorneys. Just in the last decade, there was the Bernie Madoff Ponzi Scheme, the Theranos scam, and then the FTX scandal. The only other person who’s gotten as rich as quickly as SBF is Mark Zuckerberg, according to Forbes

And Bharadwaj had a front-row seat. He lived with SBF and his team in a beach house in the Bahamas, spent all day and night working, and was consumed by his company culture. 

“I was on the inside, and I was still duped,” Bharadwaj told ThePrint. “There were customers who were duped, of course, but I was on the inside and I still didn’t know. These are people I worked with every day and trusted. They’re not cartoon villains, they’re normal people who made…evil decisions that caused people a lot of harm.” 

Also read: Binance to sell Russia business for undisclosed amount

Working at firm like Alameda

Once compared to JP Morgan, SBF was the poster child of cryptocurrency and championed “effective altruism”, a philosophy that advocates charity, philanthropy, and spending for the public good. 

Except in November 2022, SBF was charged with wire fraud, commodities fraud, securities fraud, money laundering, and violations of political campaign finance laws. In the months that followed, it came out that he had given himself over $1.3 billion in personal loans, and had spent FTX money on other things like a $16.4 million home for his parents in the Bahamas. 

The Bahamas were where FTX and Alameda were headquartered because it had a comprehensive regulatory framework for the company to register under, which doesn’t yet exist in the US. 

Bharadwaj split time between Hong Kong and the Bahamas, and moved to the latter full time in early 2022. The team was small, and there were two Indians and three Indian-Americans who worked at Alameda, including Nishad Singh — one of the four involved in the scam who pleaded guilty. 

“Everyone seemed very cool and it had an interesting mission,” said Bharadwaj. “Altruism was a big part of the philosophy of the company, and that was important to me, and resonated with me.”

He lived in a beach house with all his other colleagues on the beach, right next to the ocean. But he must have visited the beach only a handful of times, he says — everyone was almost always busy working at the office. That was the nature of their job: they were tied down by the already volatile crypto market. 

The crypto world is no stranger to scams and fake news. So in the weeks preceding the FTX crash, the employees at Alameda went about their days as usual. They’d seen plenty of ominous news on Alameda’s balance sheet doing the rounds, and fear and doubt in the media. But they just assumed it would be a busy few days of trading — this time in their office in Hong Kong, though SBF stayed behind in the Bahamas. 

“We thought we’d have to work harder to try and stabilise these markets. It didn’t seem super out of the ordinary,” said Bharadwaj.

Until they saw a public X (Twitter) post saying Binance was acquiring FTX. They knew this wasn’t a smooth acquisition, given the circumstances. Then they were told to move all their capital off the exchanges and into FTX. That’s when alarm bells started ringing. 

An all-hands meeting was called. They sat down in a circle on the trading floor, and then-CEO Caroline Ellis took her place on a bean bag. 

Ellis was tearful — she said she was sorry, and that she’d let them all down. While crying, she went on to explain that the company had taken out several loans, and those were used to make risky investments that were outside the core business of Alameda and FTX. Those loans had been recalled and they weren’t able to pay them back, so they used FTX customer funds to do so. 

The employees were shocked, but grilled her nonetheless. They asked her about the timelines, whether they would be culpable, why this was happening in the first place. When they realised that they were not going to be paid in the next cycle, and that the equity they owned was worthless, they left the office and went out for a drink in Hong Kong — and decided they would all send in their resignation letters. The dream run was over. 

“I was angry, upset, disappointed, all of those things,” said Bharadwaj. “But it’s been almost a year and I’m moving on. I’m looking forward to the trial happening and justice being served. But rather than punishment, I want to be thinking about how to prevent this in the future.”

The comedown

Bharadwaj flew back directly from Hong Kong to be with his family in Chennai. 

“There were so many missing pieces, even we were trying to figure it out,” said Bharadwaj. “I slowly began to realise that this was a major historical event. I needed to think long and hard about what I want to do, and who I want to be.” 

Even before he began to tell extended family and friends about the end of his association with SBF and Alameda, they began to reach out to him to ask if he knew anything about FTX. That was the impact the crash had: even his relatives in India knew about it. 

Bharadwaj took a break from work to reassess things. It took months to recover from the shock and the significant financial loss. And it also took months to help investigators in figuring out what happened. 

Earlier this year, he decided that he wanted to try and take his experience at Alameda and create something that would solve a lot of issues that were associated with Alameda. “I’m taking a lot of skills I built from Alameda and using it to build a platform that’s positive,” he said. “I want to democratise the crypto landscape.” 

Bharadwaj’s new startup, Astra, is building a unified infrastructure layer for crypto trading venues. The plan is to make the exchange connection reliable and robust, and also provide an easy-to-use interface that can be used on different platforms. 

“The sad thing is my work at Alameda was extremely enjoyable,” added Bharadwaj. “I loved my work and met interesting people. It was fun and exciting…up until the very end.” 

He never went back to collect his things, abandoned in the Bahamas. Nor has he spoken to SBF or Ellis since. 

Impact of the crash

SBF wasn’t just a billionaire heading an empire. He played an important role in an industry struggling to be taken seriously. He was one of the few willing to liaison with institutions to build a regulatory framework for the crypto market. 

“The FTX was a ray of hope that came back to bite everyone who supported it,” said Sharan Nair, co-founder of PYOR — a blockchain analytics company — and also part of the founding teams of Unocoin & CoinSwitch.

Nair says that the FTX scam has pushed the industry back by a couple of years. With SBF’s advocacy, it looked like American institutions were on board to support a regulatory framework that could become the industry standard. 

But instead, the dominoes fell and only exposed the holes in the system. 

It’s especially worrisome for the Indian market. “The biggest problem in India is that people don’t understand crypto can be stolen, unlike stocks,” said Nair. “And so the first good thing is that there was a focus on security, and a huge uproar around proof of reserves.”

Bharadwaj too pointed to the massive potential in the Indian market. India already has robust infrastructure like UPI — a payment system that even American infrastructure hasn’t arrived at yet. And what’s more is that Indians are getting involved in the crypto community of builders. 

During the G20 Summit, the International Monetary Fund and the Financial Stability Board released recommendations on the regulation of crypto. The G20’s financial ministers and central bank governors are meeting to discuss regulations in October in Marrakech — after SBF’s trial is set to begin.

“The FTX crash also gives confidence to the system,” said Nair. “With every test of this, the market becomes more robust — that’s how the industry stabilises.”

(Edited by Smriti Sinha)

Also read: Valkyrie Funds to add ‘ether’ futures in exchange-traded fund after SEC approval


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