Sam Bankman-Fried said he “never tried to commit fraud” while admitting he made “a lot of mistakes” ahead of the collapse of his $32bn cryptocurrency empire, which threatens to inflict significant financial losses on users of his popular FTX trading platform.
The founder of the now-bankrupt crypto exchange FTX denied “knowingly” commingling customer funds with those held by Alameda Research, his proprietary trading group.
“Clearly, I made a lot of mistakes or things I would give anything to be able to do over again,” Bankman-Fried said during an interview at The New York Times Dealbook summit.
Appearing virtually from the Bahamas, Bankman-Fried grinned nervously, repeatedly tapped his foot and appeared to shake involuntarily as he faced wide-ranging questions on topics from prescription drug use by FTX staff and the improper transfer of funds to whether he knowingly flouted risk and compliance rules that jeopardised customer accounts.
“I was failing to pay nearly enough attention to positions and positional risk on the exchange and to Alameda’s in particular and . . . I substantially underestimated what the scale and speed of the [crypto] market crash would look like,” he said.
“There is a substantial discrepancy between what the true, audited financials were . . . versus what the dashboards we had displayed for Alameda’s account, which substantially under-displayed the size of the positions.”
Bankman-Fried gave the interview just weeks after FTX, previously the darling of the global crypto industry, filed for US bankruptcy protection. The collapse of FTX was precipitated by panicked customer withdrawals and ricocheted across crypto markets. It was eventually discovered that as much as $8bn of funds were missing.
The collapse of FTX is being examined by criminal prosecutors and financial regulators in the US and the Bahamas.
The 30-year-old admitted that his lawyers had told him not to agree to interviews with journalists amid multiple investigations and pending lawsuits. “I think I have a duty to talk and to explain what happened,” he said. “I don’t see what good is accomplished by sitting in a room pretending that the outside world doesn’t exist.”
“It’s not what I’m focusing on,” he said, when asked about whether he was worried about potential criminal liability. “I had a bad month,” he added to laughter from the audience.
Following the bankruptcy filing, Bankman-Fried was replaced as chief executive of FTX by John Ray, a restructuring expert who represented plaintiffs in the Bernard Madoff and Allen Stanford frauds and helped unwind Enron. Ray said he had never seen “such a complete failure of corporate controls”.
“The [company] did not have the type of disbursement controls that I believe are appropriate for a business enterprise,” said Ray in court filings, adding that company money was spent on buying homes and personal items for FTX employees and advisers.
During Wednesday’s interview, Bankman-Fried defended his position as one of the most prolific donors to the US Democratic party in the latest election cycle.
“My donations were mostly for pandemic prevention, and they were looking at primary elections where there were candidates who are outspoken in favour of doing things now to prevent the next pandemic.”
Bankman-Fried will continue to face questions and allegations from prosecutors, regulators, investors and up to 1mn creditors over FTX’s missing funds. When asked if he would leave the Bahamas to come to the US, he said he “would not be surprised” if he was called on to give evidence at one of the numerous hearings on the collapse of the exchange.
A class-action lawsuit filed on behalf of investors in the US on Wednesday alleged FTX was “truly a house of cards, a Ponzi scheme where [FTX] shuffled customer funds between their opaque affiliated entities”.
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