Mystery continues to shroud the missing billions at bankrupt crypto exchange FTX after its disgraced founder Sam Bankman-Fried denied trying to commit fraud. He has admitted to grievous managerial errors.
In his first major public appearance since the November 11 implosion of FTX and sister trading house Alameda Research, Mr Bankman-Fried said he “screwed up” and should have focused more on risk management, customer protection and links between FTX and Alameda.
“I made a lot of mistakes,” the 30-year-old said on Wednesday by video link at the New York Times DealBook Summit.
Watch: what is Bitcoin and how did it start?
“There are things I would give anything to be able to do over again. I didn’t ever try to commit fraud on anyone.”
Mr Bankman-Fried’s participation was controversial, given that there are outstanding questions about how Bahamas-based FTX ended up with an $8 billion hole in its balance sheet and whether it mishandled customer funds.
Reports that FTX lent client money to Alameda for risky trades have stoked those concerns.
Interviewed by New York Times columnist Andrew Ross Sorkin, who said Mr Bankman-Fried was joining from the Bahamas, the FTX founder did not give a straight answer about whether he had at times lied.
Mr Bankman-Fried told the summit he “didn’t knowingly commingle funds”.
He said FTX and Alameda were “substantially more” linked than intended and that he failed to pay attention to the trading house’s “too large” margin position.
He said he was not running Alameda and that he was “nervous about a conflict of interest”.
founder of FTX
No person was in charge of position risk at FTX, he said, describing the lack of oversight as a mistake.
The comments shed little light on the question of where client funds ended up as Mr Bankman-Fried stuck to a hard-to-parse account of how Alameda ran up a massive margin position on the exchange.
The restructuring expert who took over the company in bankruptcy, John J Ray III, has painted a picture of FTX as a mismanaged company bathed in conflicts and lacking basic accounting practices.
He said it was the worst failure of corporate controls he had seen.
Mr Bankman-Fried faces a complex web of lawsuits and regulatory investigations into alleged wrongdoing.
Some observers suggest that his public comments could be used against him in litigation.
The spotlight has also fallen on an apparent company culture of working and playing hard.
Mr Bankman-Fried said there were no wild parties. He said he had been prescribed medicine over time to help with focus and concentration.
The digital asset sector is braced for widening contagion from FTX, which once boasted a $32 billion valuation before sliding into bankruptcy.
It owes its 50 biggest unsecured creditors a total of $3.1 billion and there may be more than a million creditors globally.
A crypto lender, BlockFi, filed for bankruptcy on Monday after being buffeted by the wipeout.
Embattled brokerage Genesis is striving to avoid the same fate.
BlackRock chief executive Larry Fink said earlier at the DealBook Summit that most crypto companies would probably fold after the collapse of FTX.
The world’s biggest asset manager was among companies stung by the chaotic unravelling of Mr Bankman-Fried’s tangled web of 100-plus FTX-related entities.
Mr Bankman-Fried has provided convoluted accounts on social media and in interviews with other news outlets about what led to FTX’s woes.
Advisers overseeing the ruins of his business have slammed non-existent oversight.
As if such travails weren’t enough, the exact breakup of a $662 million outflow from FTX as it tumbled into bankruptcy remains another enigma.
Mr Bankman-Fried told the event that there was improper access to FTX after its spiral.
US Treasury Secretary Janet Yellen, another speaker at the summit in New York, called the FTX debacle “the Lehman moment within crypto”, referring to the collapse of investment-banking company Lehman Brothers in 2008.
Crypto markets have stabilised somewhat after lurching lower in November as the turmoil around FTX thickened.
Even so, a gauge of the top 100 tokens is down more than 60 per cent this year, hit by tightening monetary policy and a series of crypto blow-ups, of which FTX is the most spectacular.
Mr Bankman-Fried’s fortune at one point reached $26 billion, and just weeks ago he was described as the John Pierpont Morgan of digital assets, willing to throw around his wealth to bail out the industry.
He said during the interview that he’s down to one credit card and $100,000 in the bank.
Pressed on whether he had been straight about FTX, Mr Bankman-Fried said: “I was as truthful as I’m knowledgeable to be.”
Cryptocurrencies — in pictures
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The crypto market, which includes currencies such as Bitcoin, pictured, has lost $2 trillion of its value in six months. Unsplash -
The price of Ethereum, the second largest cryptocurrency by market size, has fallen by 70 per cent this year. Investors and analysts are watching to see if it will dip below $1,000. Unsplash -
Dogecoin, supported by Elon Musk, is about 90 per cent down from May last year, yet it is outperforming Bitcoin and Ethereum in the current crash. Unsplash -
The government of El Salvador has invested $105 million in Bitcoin. President Nayib Bukele's embrace of the cryptocurrency as legal tender is being questioned as the market crashes. Getty -
Changpeng Zhao, founder of crypto exchange giant Binance, has compared the current market turmoil to the dotcom bubble of the early 2000s. Still, the company is aggressively pursuing licensing in international jurisdictions and introducing new products. Getty -
Tether is the biggest issuer of stablecoins, a type of cryptocurrency pegged to a traditionally stable asset like the US dollar. Most stablecoins are meant to maintain a constant price of $1 and are backed by real reserve funds, making it easy to convert crypto investments into cash. But Tether's financial statements show that may not be true, leaving the issuer and its investors vulnerable. Unsplash -
The recent crypto crash can in part be attributed to the collapse of TerraUSD, a stablecoin pegged to the US dollar through algorithms and linked to a "sister" cryptocurrency named Luna. When the price of Luna plummeted, TerraUSD also fell, creating a “death spiral” to practically zero for both coins. Unsplash -
On June 12 crypto lender Celsius Network said it had paused customer withdrawals, saying it needed “to stabilise liquidity and operations”. Investors are still waiting, with no signs that the current meltdown will let up. Getty
