In Defense of SBF

This article from The Wall Street Journal suggests that what happened was more like "taking funds from customers with full knowledge" than like a mistake:

In a video meeting with Alameda employees late Wednesday Hong Kong time, Alameda CEO Caroline Ellison said that she, Mr. Bankman-Fried and two other FTX executives, Nishad Singh and Gary Wang, were aware of the decision to send customer funds to Alameda, according to people familiar with the video.

(See also this article by The New York Times, which describes the same video meeting.^[1])

There are other signs of fraud. For example:

• Reuters reports that FTX had a "backdoor" which "allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors," according to their sources.
• On November 10, the official FTX account on Twitter announced that FTX was ordered to facilitate Bahamian withdrawals by Bahamian regulators. Days later, the Securities Commission of the Bahamas claimed that that was a lie. As Scott Alexander put it, "this might have been a ruse to let insiders withdraw first without provoking suspicion."
• FTX's legal and compliance team resigned very early in this. As Matt Levine pointed out in one of his articles about the debacle (https://archive.ph/OER98), this probably means that they were not aware of what was going on. 
• Prior to this, FTX and Alameda insisted that they were at "arm’s length" and that Alameda did not get preferential treatment at FTX. However, according to The New York Times's sources, Alameda CEO Caroline Ellison "had been sitting within view of computers displaying [FTX]’s trading data," despite Alameda being supposed to operate in a different office. Moreover, Mr. Bankman-Fried was also involved in Alameda, according to the NYT, "contributing to the decision-making on big trades."

1. ^{^}

   Key section: 

   Meanwhile, at a meeting with Alameda employees on Wednesday, Ms. Ellison explained what had caused the collapse, according to a person familiar with the matter. Her voice shaking, she apologized, saying she had let the group down. Over recent months, she said, Alameda had taken out loans and used the money to make venture capital investments, among other expenditures.

   Around the time the crypto market crashed this spring, Ms. Ellison explained, lenders moved to recall those loans, the person familiar with the meeting said. But the funds that Alameda had spent were no longer easily available, so the company used FTX customer funds to make the payments. Besides her and Mr. Bankman-Fried, she said, two other people knew about the arrangement: Mr. Singh and Mr. Wang.

The first half of this post reads like "I trust he didn't know because he said so and I choose to trust him." That's not convincing at all. Since you talk about incentives of "disloyalty" on future actions, I want to also flag that being naive / too trusting  encourages more fraud.

In the second half of the post, you assume it was indeed fraud but you say maybe it's okay because we're only in this situation now because he got caught. Which one is it? That makes me think "it sounds like you were going to defend him no matter what came out." 

I like the FedEX story. I think it's quite different from the FTX situation, though. The stakes were so much lower (even if we adjust for inflation) and getting caught was an acceptable risk. By contrast, this FTX situation is so far beyond anything that is redeemable when you get caught that you should never have enough confidence in practice to even attempt it, even if we're for the moment assuming act utilitarianism.

You ask us to envision a world where Sam amassed 300 billion and it's all legit and secured because crypto (or other investments) hit a golden run. Okay, but what about the world where it looks like he he amassed 300 billion, but then it all implodes and he's 100 billion on the hook instead of 10? It seems like, based on what we know about how he operated, that world is more likely than the successful one.

Strongly disagree with most of this but upvoting because I am actively in favor of people laying out their reasoning for unpopular positions so that people can engage with the reasoning directly, rather than only operating only on the level of "this is wrong and you should feel bad".

Risk-taking and ambition are two sides of the same coin. If you swarm to denouncing risks that failed, you do not understand what it takes to succeed. My very subjective sense of people in the EA community is that we are much more likely to fail due to insufficient ambition than too much risk-taking, especially without the support and skillset of the FTX team.

Risk taking and ambition are two sides of the same coin when the parties who stand to bear the downside are the ones who benefit from the upside, and can consent. Appropriating user funds to bear the downside risk without their knowledge is not ambition, it is theft and not morally acceptable. If for example, Alameda had collapsed due to trading losses, but customer deposits on FTX were untouched, then it would be an entirely different matter.

Thank you for posting this. I haven't yet read through the whole thing yet, and I don't necessarily agree with it, but I think it's important that people feel comfortable expressing their opinions here. The fact that within minutes of posting this has gotten -8 votes is something I find concerning, as I doubt those people have even had time to read and process what you said before voting and I suspect they're voting based on anger and groupthink. I hope the community will be able to have a productive conversation in these comments.

Thanks for having the courage to write this. Regardless of whether it's correct, it is good to have the position represented and it is much easier in the current environment to take the other side on this.

I applaud that you wrote how you feel against social incentives.

It seems to me that the main way for our community to avoid allowing future devastating mistakes like with SBF/FTX is to have more posts like this and norms that encourage dissenting opinions and go against hype (anti-hype?).

Especially if it's true that people had heard rumors about some problems or had some reasons to act on pieces of information in regards to SBF character, but silenced themselves. Punishing socially these kind of posts seems like recreating the environment for such moral and truth-seeking failure.

On a relevant note, it's a bit problematic that main posts don't have disagree voting though, because maybe people vote on whether they agree and don't necessary want to punish you for expressing your feelings.

This seems like an odd post to me.  Your headline argument is that you think SBF made an honest mistake, rather than wilfully misusing his users' funds, and most commenters seem to be reacting to that claim. The claim seems likely wrong to me, but if you honestly believe it then I'm glad you're sharing it and that it's getting discussed.

But in your third point (and maybe your second?) you seem to be defending the idea that even if SBF wilfully misused funds, then that's still ok. It was a bad bet, but we should celebrate people who take risky, but positive EV, gambles, even if they strongly violate ethical norms. Is that a fair summary of what you believe, or am I misreading/misunderstanding? If it is, I think this post is very bad and it seems very worrying that it's currently got +ve karma.

I think your latter points are better supported than your first point and I hope people keep reading long enough to get there. Additionally, I am upvoting this post because I agree with the lessons you are trying to share regardless of whether we should apply the lessons to the community's reaction to SBF specifically (I think we probably should, but like, probably not do a 180 degree pivot to be all fluffy rainbows about it and act like it was okay). 

Anyway, I'm just happy to see someone talking about loyalty, mistakes, other worlds, compassion, and stuff. These are important issues. And even if they were not that important, and should be just a small weighting of how we should decide how to react to SBF, they still should be factored in yet so far no one has brought them up. 

And yeah it sucks that me saying I upvoted this post means I might get downvoted. Hold your trigger fingers plz :(

And on a personal note, I aspire to create a lot of value for the world, and direct it towards doing lots of good. Call me overconfident, but I expect to be a billionaire someday. The way EA treats SBF here sets a precedent: if the EA community is happy to accept money when the going is good, but then is ready to cut ties once the money dries up… you can guess how excited I would be to contribute in the first place.

This is a weird paragraph. If your goal were doing the most good, why would it matter how you expect EA to treat you in the case of failure? It kinda sounds like your goal is social status among the EA community.

This isn't to say that you don't have a good point. If people are donating to EA because they want social status, that's still money going towards good causes, and perhaps we should reward them for that in order to encourage more people to do so. But I'd have a hard time calling that "altruistic behavior" on their part.

I'm glad you wrote this. I'm with the vast majority of people in thinking it extremely unlikely that Sam just made an honest mistake, but given that you think he did, I'm glad you wrote this.

Whether this blowup was caused by intentional deception or an honest mistake, the EA community has been extremely quick to change its tune. In less than a week, everyone has gone from “SBF, golden boy” to “What a criminal, don’t be like that guy”.

I think this comment re urgency is very relevant here. I think that when you suddenly have a lot of people briefly looking at you who know nothing about you beyond your association with something negative, it's reasonable to just make very basic points very clearly while being very mindful that many people will try their hardest to take whatever you say out of context to prove that their initial assessment of you was correct.

I have seen a growing trend among EAs disregarding the law and due process. I have also been told not to be a legal alarmist when I have raised concerns about how a prog, event or grant is administered. I will not get into specific examples, but I think a culture where the thought process is " law and procedure should not come in the way of doing good " or 'let's weigh the risk of not following v/s the possible good"  creates a situation where decisions are made with brashness.  I think the situation with SBF is less to do with thoroughly thought-out fraud to more with brash decisions being made. 

We have created demigods in the EA world, which set the tone and tenor of how things are done.  This event with FTX is a good reminder for us as a community to reset. 

I think your latter points are better supported than your first point and I hope people keep reading long enough to get there. Additionally, I am upvoting this post because I agree with the lessons you are trying to share regardless of whether they fit SBF specifically (I think they probably do, but I'm actually too tired to say right now and am just happy to see someone talking about loyalty and stuff)

I think Sam is a good, wonderful, thoughtful, kind person who lost his way. His motivation was and always has been EA. He got enamored by the game (goal, constraints, rewards ) and hyper focused on winning and - yes - as he says" screwed up". Let's give him some grace. He's in a tough spot & needs us. #SupportSam

I'm personally still reserving judgment until the dust settles. I think in this situation, given the animosity towards SBF from customers, investors, etc, there are clear incentives to speak out loud if you believe there was fraud, and to stay quiet if you believe it was an honest (even if terrible) mistake. So we're likely seeing biased evidence.

Still, a mistake of this magnitude seems at the very least grossly negligent. You can't preserve both the integrity and the competence of SBF after this. And I agree that it's hard to know whether you're competent enough to do something, until you do it and succeed or fail. But then the lesson to learn is sonething like "be in constant vigilance, seek feedback from the people who know most about what you are trying to do", etc.

Also, loyalty is only as good as your group is. You can't use a loyalty argument to defend a member of your group when they become suspect of malfeasance. You might appeal to the loyalty of those who knew them best and didn't spot any signs of bad behavior before, but that's only a handful of people.

Never attribute to malice that which is adequately explained by stupidity — Hanlon’s razor

Why? Hanlon's razor is an overused and rarely argued for article of faith in the EA / rationalist sphere, which sounds wise, but could easily be wrong. 

Moreover, it's best used as a heuristic, and should be defeasible by moderate evidence.

Mistake theory is not inherently superior to conflict theory; it's an empirical claim.

Maybe Hanlon's razor is a piece of 'reversable advice', which is useful only if you are already inclined to see malice everywhere. But if you wield it, you'll misattribute some actions to stupidity when they were actually malicious, because malicious actions can often be explained by incompetence. In fact, they're designed to look that way, because people don't like providing inconvertible evidence that they are untrustworthy. So you'll be taken advantage of.

The more powerful someone is, the more dangerous it is to mistake their malice for incompetence.

Why do I believe this “bad judgement” thesis? Well, it’s what Sam claims. [...] I’m biased towards trusting people at their word; and furthermore, SBF was a personal hero of mine. [...] I choose to believe this.

Sam's claims are a very small piece of evidence, since I'd expect to see him claim innocence and defend himself regardless of whether he is malicious or incompetent.

I find these points credulous, and they seem to be the foundation on which you are arguing that FTX was innocent of malice.

I think that unless we update, EA's culture of trust - that it doesn't even occur to us to imagine a traitor in our midst - will lead us to pal up with criminal ultra-rich people again and again. (This might not be the first time - with 50% confidence I think the criminality of former EA darling Ben Delo was malicious rather than a mistake.)

Great post and glad to see contrarian takes. (That's true as a general matter but I also happen to agree with this one :P)

Couple quick thoughts: 

1. Loyalty is important not just as a personal virtue but for efforts at collective action because it convinces people to engage in long term altruistic thinking. Hahrie Han has done some important empirical work showing that people are motivated to help when they have a sense of a shared past, shared future. Sudden ruptures in social relationships are very destructive for fostering that culture. 

2. Good decision-making generally does not involve dramatic changes to our beliefs. This is one of the less-known aspects of Tetlock's research on super predictors. They very rarely make large updates but are rather making small updates based on continuous data; they don't overcorrect when the mob moves. It seems likely to me that this is an example where we can try to put Tetlock's research to effect. I don't see the sort of dramatic evidence I would need to change my mind about SBF (though I also probably did not view him as highly as many others; my prior was that Sam was a very smart guy who was well intentioned but going in the wrong direction in life.) 

3. Good decision-making requires avoiding the Fundamental Attribution Error. I imagine most people are aware of the FAE on this forum. But I blogged about systemic forces that seem more important to me, in the collapse of FTX, than any of Sam's personal misdeeds. 

Thanks for posting this against the social incentives right now.

My initial reaction to the situation was similar to yours - wanting to trust SBF and believe that it was an honest mistake.

But there are two reasons I disagree with that position. 

First, we may never know for sure whether it was an honest mistake or intentional fraud. EA should mostly not support people who cannot prove that they have not committed fraud. Many who commit fraud can claim they were making honest mistakes.

Second, when you are a custodian of that much wealth and bear that much responsibility, it's not ok to have insufficient safeguards against mistakes. It's immoral to fail in your duty of care when the stakes are this high.

https://www.theguardian.com/us-news/2022/dec/12/former-ftx-ceo-sam-bankman-fried-arrested-in-the-bahamas-local-authorities-say

I'm not sure that the mistake vs. fraud angle is very meaningful beyond the question of is SBF wrong for taking stupid risks or wrong for doing fraud - this is an important distinction, yes, but in terms of how EA should be reassessing it's own frameworks and norms, I think a number of important issues are the same in both cases.

Here’s my model of what happened: SBF was busy. Things were confusing. He made a lot of decisions. One of them blew up. 

I feel like this scenario should also be the cause for a significant reassessment of the people involved and community norms, oversight, etc. because there's a point where mistakes being made, in this case more or less unilaterally, at such a huge scale should be made as difficult as possible, not supported by a "take risks and see what sticks" mentality. There's a very important difference between crashing a website or printing flyers with a typo and losing investor money. It's a mistake that leads to serious harm to people that FTX had a legal and moral duty that was not fulfilled, even if it was a mistake. Even if all tings were perfect and a mistake occurred as the result of an act-of-god type fluke, there would still be good reasons to call into question SBF's capability and judgement as a steward for funds, particularly in the absence of signs that there were meaningful efforts to mitigate, which to the best of my knowledge there are none. Yes, mistakes can be hard to foresee, and yes, they are a part of doing business, but I don't feel like mistakes of such a huge scale should be just treated as learning opportunities as a lack of necessary and serious consequences disincentivizes taking the necessary care and effort to avoid future mistakes. 

Whether this blowup was caused by intentional deception or an honest mistake, the EA community has been extremely quick to change its tune. In less than a week, everyone has gone from “SBF, golden boy” to “What a criminal, don’t be like that guy”. EA leaders have posted denunciations of fraud, and distanced themselves from Sam; the most upvoted all-time EA Forum post is a community condemnation; the entire Future Fund team up and resigned.

If anything, I think this should be a sign that EA and related organizations should probably be keeping their donors, particularly their megadonors, at arms length instead of treating them as golden boy poster children for the movement, allowing them significant influence, and integrating them so deeply into the movement. To me, this is a matter of good governance more so than PR, but it does cut both ways. Allowing megadonors to buy influence and becoming so deeply enmeshed that the fortunes of the donors and the movement are intertwined (both literally and metaphorically) doesn't just allow for reputation washing, it allows the donor to buy influence and intellectual/ideological control.  It also, as evidenced by this post, creates a dynamic where there can be an expectation of "loyalty" to donors despite what appears to be blatant fraud because of their previous donations and involvement. No one should be able to buy influence over or the loyalty of a movement that is supposed to empirically guided.

 Risk-taking and ambition are two sides of the same coin. If you swarm to denouncing risks that failed, you do not understand what it takes to succeed. 

Again, even in the absence of fraud, I would argue that norms should not be to encourage taking significant risks with significant potential downfalls and counterfactuals, particularly when you're taking risks with other people's money without being a clear go-ahead to do it. The world where SBF didn't make a mistake/do fraud and lose 15 billion dollars but played it safe to make and donate 5 billion is the better option, both for EAs and for the creditors of FTX, and for SBF himself.  Arguably, the world where SBF continued to just ETG on Jane Street may even a better world than the current one depending on the fallout of the current situation. Cultivating a culture where risk taking and ambition is encouraged regardless of scale is, imo, bad.

I can't understand this position. 

|Take a step back: what are we assessing here? If the question is “should I associate with a person who has this track record, and also once fraudulently misused customer money, but has repented and is trying as hard as possible to fix it”… the answer seems like a clear yes to me. And as a prosaic consideration, I continue to believe that Sam and the rest of the FTX leadership team are extremely talented and aligned people. Even with tarnished reputations today, I expect them to accomplish good and great things. To jump immediately to cutting ties seems like a large strategic error."

The answer is obvious: NO, never hand your money to someone who previously stole it. In a different universe where he made money by betting it all on black/red at the roulette table, and won, and gave me money: still NEVER. 

There's been disloyalty all right. It's from SBF. He defrauded people who trusted. That's the definition of disloyalty and there's no coming back from that. It's not just stupidity. (And why would you hand your money and trust to the stupid either?)

He's a thief. It's not very complicated. It's not suddenly OK if you win on a bet. It's still betting with other people's money after promising not to.