Sam Bankman-Fried admits mistakes, but denies trying to commit fraud at FTX

Crypto exchange founder says FTX and sister trading house Alameda were more linked than intended

Sam Bankman-Fried, founder of collapsed crypto exchange FTX, has said he now only has one credit card and $100,000 in the bank. Bloomberg
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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.

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“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”.

Quote
There are things I would give anything to be able to do over again. I didn’t ever try to commit fraud on anyone
Sam Bankman-Fried, 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.”

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Updated: December 01, 2022, 7:22 AM
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