The Defiant

SBF Says He ‘Did Not Commit Fraud’ in Latest Public Comments

‘I Have a Duty to Talk to People,’ Disgraced Founder Says Despite Threat of Self-Incrimination

SBF Says He ‘Did Not Commit Fraud’ in Latest Public Comments

The swift collapse of FTX was a “massive failure of oversight, of risk management,” disgraced founder Sam Bankman-Fried said in a live interview Wednesday evening.

The hour-long virtual interrogation, which capped off the New York Times’ annual Dealbook Summit in New York City, was Bankman-Fried’s first live appearance since a run on customer deposits forced FTX to halt withdrawals and eventually file for bankruptcy.

The interview touched on Bankman-Fried’s willingness to talk to the press despite potential self-incrimination, drug use at FTX, his net worth in the wake of FTX’s bankruptcy and, of course, the sequence of events that lead to the firm’s demise.

FTX is now in the hands of John Ray, the corporate turnaround specialist who led Enron after it filed for bankruptcy some 20 years ago. In a court filing, Ray said he had never “seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

AlamedaReseachDownBad

FTX Leadership Borrowed Over $1B From Alameda

Incoming CEO John Ray Cites ‘Complete Absence of Trustworthy Financial Information’

The Defiant The Defiant

Ray also said he believes there was a “secret exemption of Alameda [Research] from certain aspects of FTX.com’s auto-liquidation protocol”; that FTX had no semblance of an HR department or basic financial bookkeeping, and that Bankman-Fried communicated with other executives and employees via self-deleting messages, resulting in an “absence of lasting records of decision-making.”

“Didn’t Know”

“I didn’t knowingly commingle funds” between FTX and Alameda Research, Bankman-Fried’s trading firm, the 30-year-old repeatedly insisted. 

Despite speaking at length, however, Bankman-Fried did not explain how Alameda came to cover margin calls on loans it had taken out using FTX customer funds, as the Wall Street Journal previously reported. Although he founded Alameda, held a 90% stake in the company and had an on-and-off relationship with its CEO, Caroline Ellison, he was not in charge of the company and knew little of its operations, he said. 

Coffeezilla, an internet personality known for uncovering online scams, said it was impossible Bankman-Fried was unaware funds had been commingled.   

“In actual fact, for years you had to WIRE ALAMEDA Research money to even get money on FTX,” he wrote. “Funds were ALWAYS co-mingled.”

Indeed, at one point in the interview, Bankman-Fried acknowledged that customers had to get funds to FTX through Alameda. 

“For years FTX didn’t have bank accounts,” he said. “Customers wired funds to Alameda to be credited to FTX.”

Jon Wu, head of growth at crypto firm Aztec, noted the contradiction. 

“SBF essentially admitting to fraud,” he tweeted

‘Nervous’

Bankman-Fried said he became nervous on Nov. 2, when CoinDesk published a story that revealed 40% of Alameda’s balance sheet was denominated in FTT, an illiquid token issued by FTX to juice trading on its platform. That revelation set in motion the sequence of events that led to FTX’s bankruptcy.

At the time, he thought it could harm Alameda, he said. It wasn’t until Nov. 7 — the same day he insisted on Twitter that customer funds were secure — that Bankman-Fried became concerned about FTX, he said.

On Nov. 11, Bankman-Fried resigned from FTX and the company filed for Chapter 11 bankruptcy in New York.

Some observers live-tweeting the interview were skeptical of Bankman-Fried’s claim that FTX’s collapse was the result of negligence rather than fraud. 

‘Fraud as Incompetence’

“The SBF legal strategy is to attempt to characterize fraud as incompetence, in order to stay out of jail,” crypto investor Vinny Lingham said

Coffeezilla agreed. 

“He is dodging every major question with a claim of ‘ignorance and shock’ and what was going on at his own company,” he wrote. “At this point, SBF is begging people to believe he’s stupid and incompetent. It’s not true.”

At least one person had a more generous take. 

“Call me crazy, but I think @sbf is telling the truth,” hedge fund billionaire Bill Ackman wrote.

Over the past three weeks, Bankman-Fried has given several interviews, talking to reporters from the New York Times, Reuters and Vox. (He insisted Wednesday that he believed the message exchange with Vox reporter Kelsey Piper was an off-the-record conversation between longtime friends. Piper has denied that characterization of their relationship.)

Observers have wondered on social media whether Bankman-Fried is being advised by an attorney, given his willingness to give interviews that could be used against him in court.

Self-Incrimination

“I think I have a duty to talk to people [and] explain what happened,” he told New York Times reporter Andrew Ross Sorkin Wednesday. “If there is anything I can do to try and help customers out here, I don’t see what good is accomplished by sitting locked in a room, pretending the outside world doesn’t exist.”

Judd Legum, the author of the Popular Information newsletter, wasn’t buying it. 

“What is SBF doing to help FTX customers?” he wrote. “He’s no longer even part of FTX. Going on a media tour does not help FTX customers.”

Sorkin asked Bankman-Fried whether he believes he will be charged with any crimes.

“I don’t personally think that I have [criminal liability],” he said. “The real answer is, that’s not what I’m focusing on.

“Bad Month”

“There’s going to be a time and a place for me to sort of think about myself and my own future, but I don’t think this is it — I mean look, I’ve had a bad month,” he added, to laughter from the live audience in New York.

Bankman-Fried repeatedly said he has been cut off from FTX’s internal data since his resignation, making it difficult to piece together the sequence of events that led to FTX’s collapse and everything that has happened since. Those include the fact that FTX’s US arm has stopped processing withdrawals.

“FTX US is totally solvent,” he said. “I’m confused why FTX US is not processing customer withdrawals right now … it doesn’t allow leverage of any sort; it’s close to a spot trading platform.”

On Drug Use

Sorkin also asked Bankman-Fried to address comments he’d made on social media recommending the use of stimulants as well as images circulating online that appear to show packages for Emsam, an antidepressant used off-label as a nootropic, on his desk.

Bankman Fried did not confirm or deny his use of any specific drugs and declined to speak for colleagues.

“I had my first sip of alcohol after my 21st birthday … there were no wild parties here,” he said. “I have been prescribed various things at various times to help with focus and concentration, and I think they have done that. … These have all just been totally on label use of medications, and things that on the margin help me focus a little bit.”

Bankman-Fried, who was worth an estimated $20B a month ago, said he believes he now has about $100,000 in his bank account, having put “everything” into FTX.

At the end of the interview, Sorkin asked Bankman-Fried whether he had been truthful Wednesday.

“I was as truthful as I am knowledgeable to be,” he replied.

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