FTX founder Sam Bankman-Fried denies stealing funds and stashing billions

Former billionaire has pleaded not guilty to criminal charges after being accused of cheating investors through his now-bankrupt cryptocurrency platform

Sam Bankman-Fried, former chief executive of the now-collapsed FTX cryptocurrency exchange, leaves Manhattan federal court in New York. AFP

Sam Bankman-Fried, the former chief executive of collapsed cryptocurrency exchange FTX, said he did not steal money and blamed the crypto market crash for his platform going bankrupt in an unusual online blog post on Thursday.

“I didn’t steal funds, and I certainly didn’t stash billions away. Nearly all of my assets were and still are utilisable to backstop FTX customers,” Mr Bankman-Fried said in the blog post on Substack.

“I’ve been, regrettably, slow to respond to public misperceptions and material misstatements. It took me some time to piece together what I could — I don’t have access to much of the relevant data, much of which is for a company [Alameda] I wasn’t running at the time.”

Mr Bankman-Fried, who was arrested in the Bahamas last month, wrote out his version of the events that led to his company’s collapse.

FTX International and Alameda were both independently profitable businesses in 2021, each making billions. Then Alameda lost about 80 per cent of its assets’ value over the course of 2022 due to a series of market crashes. FTX was also affected by Alameda’s decline.

Sam Bankman-Fried, co-founder of the failed cryptocurrency exchange FTX, is escorted out of Magistrate Court after a hearing in Nassau, Bahamas, last month. AP

Mr Bankman-Fried is accused of stealing billions of dollars in FTX customer deposits to support his Alameda Research hedge fund, to buy real estate and to make political contributions in what prosecutors have called a fraud of epic proportions.

The Massachusetts Institute of Technology graduate rode a boom in the value of Bitcoin and other digital assets to build a net worth of an estimated $26 billion. He eventually became an influential political donor in the US.

But FTX collapsed in early November after a wave of withdrawals and consequently declared bankruptcy on November 11, wiping out Mr Bankman-Fried's fortune. He later said he had $100,000 in his bank account.

Mr Bankman-Fried was extradited last month from the Bahamas, where he had been living and where the exchange was based.

Since his release on a $250 million bond on December 22, Mr Bankman-Fried has been subject to electronic monitoring and is required to live with his parents, both professors at Stanford Law School in California.

Earlier this month, he pleaded not guilty to criminal charges.

In the blog post, Mr Bankman-Fried said Alameda’s balance sheet had grown to nearly $100 billion of net asset value, $8 billion of net borrowing and $7 billion of liquidity on hand in 2021. But Alameda failed to sufficiently hedge against the “risk of an extreme market crash”.

The “hundred billion of assets had only a few billion dollars of hedges”, he said.

“Alameda failed to sufficiently hedge its market exposure. Over the course of 2022, a series of large broad market crashes came — in stocks and in crypto — leading to a [nearly] 80 per cent decrease in the market value of its assets.”

'Fateful Tweet'

On November 6, Changpeng Zhao — chief executive of Binance, the world's largest crypto exchange — tweeted about selling a huge part of FTX’s native token FTT. That worsened the situation and FTX quickly failed.

“Then came CZ’s [Changpeng Zhao's] fateful tweet, following an extremely effective months-long PR campaign against FTX — and the crash,” Mr Bankman-Fried wrote in the blog.

“Alameda became illiquid, FTX International did as well, because Alameda had a margin position open on FTX; and the run on the bank turned that illiquidity into insolvency.”

Mr Zhao has previously said that he did not realise the tweet “would cause so much change”, according to a Bloomberg report.

In his post, Mr Bankman-Fried stressed that “very substantial recovery remains potentially available”.

“FTX US remains fully solvent and should be able to return all customers’ funds. FTX International has many billions of dollars of assets, and I am dedicating nearly all of my personal assets to customers,” he said.

Last month, two top associates of Mr Bankman-Fried pleaded guilty to criminal charges and are co-operating with US prosecutors leading the investigation into FTX’s collapse.

The FTX founder's trial is scheduled to start on October 2.