Sam Bankman-Fried’s new gig

Howdy.?I'm senior reporter Phil Rosen. This morning I am beside myself that, on the heels of a pivotal?inflation report, the biggest story in markets is still the absurd, ongoing FTX saga.?

As of Thursday, Sam Bankman-Fried is not only a fallen billionaire accused of orchestrating a years-long fraud to the tune of billions, but he's also Substack's latest celebrity newsletter writer.

The plot thickens perpetually, it seems.?

By the way: Today at 11:30 a.m. ET I'll be hosting a one-hour Q&A session on Reddit about FTX and crypto — I'll be posting the link to join on?Twitter?30 minutes before we start.

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1. Presumably writing from his parents' $4 million property?in Palo Alto, California near Stanford, Sam Bankman-Fried published a lengthy?newsletter?yesterday, titled "FTX Pre-Mortem Overview."

One statement stood out to me: "I didn't steal funds, and I certainly didn't stash billions away."

That sentence was buried in the middle of his post.?

It's right in line with his not guilty plea from January 3 in the Justice Department's criminal case, and represents his most recent denial of regulators' allegations that he?defrauded investors?and used customers' cash for vague, illicit things like buying real estate in The Bahamas.?

In the note, Bankman-Fried highlighted?that both FTX and Alameda Research were?raking in billions in profits in 2021.?

A key to the collapse, he explained, was 2022's crypto bear market that left just about every token worth dramatically less than the year prior.

Alameda lost "about 80 percent" of its assets' value last year, Bankman-Fried said, which then dragged down FTX in a similar fashion to how Three Arrows Capital pulled down Voyager and other crypto firms.

In expressing his regret for FTX's bankruptcy filing, he also said that the international branch of FTX had $8 billion in assets when the new CEO, John Ray III, took over, and that a "very substantial recovery" remains?on the table.

"I believe that, had FTX International been given a few weeks, it could likely have utilized its illiquid assets and equity to raise enough financing to make customers substantially whole," Bankman-Fried maintained.

Those comments come a day after lawyers for FTX said in a bankruptcy hearing that the company has located more than?$5 billion in assets?to repay creditors.??

Another fascinating tidbit:?This entire?FTX fiasco?kicked off on November 2 after a CoinDesk report revealed troubling details of Alameda's balance sheet —?remember?

Well, Bankman-Fried yesterday outlined?two versions?of the hedge fund's balance sheet, one from each of the past two years. (You can see screenshots of them here.)

He estimated that in 2021, Alameda's net asset value soared to about?$100 billion. That year, he said the firm had roughly $8 billion in net borrowing from venture capital investments, interest payments to lenders, and?buying out Binance's stake?in FTX.

So before 2022's crypto winter,?it would have taken a 94% market crash to pull Alameda underwater, in his view, because it was "massively overcollateralized."?

In other words, it had?deep enough coffers?to account for any liquidity issues — but that led to the decision to maintain its long position, and they failed to hedge against the risk of an extreme crash.

"Alameda's assets–a combination of altcoins, crypto companies, public equities, and venture investments–fell around 80%?over the course of the year," Bankman-Fried wrote, "raising its leverage bit by bit."

What is your view on cryptocurrency investments this year, after last year's sell-off and in light of the FTX drama? Let us know in the comments.

In other news:

2. Buy these high-quality stocks that will beat the market as a recession hits in the next six months.?Bank of America strategists picked out 15 great names that investors can pile into ahead of a downturn —?see the list here.

3. Vanguard's global head of portfolio construction breaks down why the 60/40 portfolio still offers the best bet at long-term success.?Even after that classic balance faltered big in 2022, it could bounce back to net high returns.?He laid out the key investments to make right now.

4. These two brothers quit their Wall Street jobs to build ETFs that help everyday investors reach their money goals.?And they were able to outperform most of their competition over the last 12 months.?They explained how a Ray Dalio-inspired strategy fueled gains and helped them beat the S&P 500 in a year of dismal returns.

5. Bed Bath & Beyond is in the midst of an epic short-squeeze.?Bearish traders are playing a game of chicken with a potential bankruptcy.?The stock has skyrocketed 230% in four days.

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This newsletter was curated by Phil Rosen.