Sam Bankman-Fried Responds To FTX Collapse In New Interview

Topline

Former FTX CEO Sam Bankman-Fried claimed in a live New York Times interview Wednesday the collapse of his cryptocurrency exchange was driven by numerous mistakes on his part rather than fraudulent activity, as FTX faces allegations it wrongly used billions of dollars in customer funds in a failed attempt to prop up its sister trading firm Alameda Research.

Then-CEO of FTX Sam Bankman-Fried testifies during a hearing before the House Financial Services … [+] Committee at Rayburn House Office Building on Capitol Hill on December 8, 2021 in Washington. (Photo by Alex Wong/Getty Images)

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Key Facts

Bankman-Fried acknowledged “clearly I didn’t do a good job” as head of FTX, saying there were immense accounting mistakes he should have caught, but he insisted he “didn’t ever try to commit fraud” and was “shocked” by the exchange’s collapse earlier this month.

He also pushed back on concerns that FTX’s ties to Alameda Research were inappropriate, insisting he “wasn’t running Alameda” and “didn’t know exactly what was going on,” even though Bankman-Fried co-founded Alameda, had extensive ties to its leaders and said he worked as a consultant for Alameda “involved in venture investing.”

The disgraced CEO also said he was “not nearly cautious enough” in evaluating the risk of lending to Alameda, claiming he didn’t recognize the “extreme downside perspective” of cryptocurrency.

He said the company “completely failed on” both risk management and “conflict of interest risk,” adding FTX did not have anyone solely in charge of examining the risk customers took on.

In hindsight, Bankman-Fried claimed the company was spending “an enormous amount of our energy on compliance” to get licensed in different jurisdictions, even though FTX’s newly appointed CEO said in a recent bankruptcy court filing, “Never in my career have I seen such a complete failure of corporate controls.”

Bankman-Fried said he had no clear explanation for a suspicious transfer of $515 million of FTX funds after the bankruptcy filing, suggesting it may have been the result of “improper access of assets.”

When asked about his political donations, Bankman-Fried claimed they were sourced from “company profits” and that he gave to both Republicans and Democrats, primarily for what he called “pandemic prevention” (in the 2022 election cycle, Bankman-Fried was one of the largest billionaire donors to Democratic campaigns and organizations).

Bankman-Fried made the remarks Wednesday in a videoconference interview with journalist Andrew Ross Sorkin at the Times’ Dealbook Summit, in his first lengthy public comments since FTX filed for bankruptcy earlier this month.

He said he appeared at the conference despite strong discouragement from his lawyers, stating he believes he has a “duty to explain what happened” and is not “focusing” on potential criminal liability.

Toward the end of the interivew, Bankman-Fried hesitated when pressed on whether he’s been entirely truthful about FTX, ultimately saying, “I don’t know of times when I’ve lied,” though he acknowledged he sometimes acted as a “marketer” and focused disproportionately on the company’s upsides rather than its downsides.

Contra

On several occasions Bankman-Fried insisted FTX.US, its cryptocurrency exchange for customers in the United States, remains “totally solvent” and should be able to handle customer withdrawals, even though the U.S. exchange was part of FTX’s bankruptcy filing.

Crucial Quote

“I was excited about the prospects of FTX just a month ago,” Bankman-Fried said.

Tangent

Bankman-Fried rejected rumors that drug-fueled parties dominated FTX’s staff culture, saying get-togethers with coworkers involved “having people over for dinner” and “board games,” with almost no drinking and no illegal drug use. He said he only drinks “maybe half a glass of alcohol per year,” though he was never asked about his alcohol use.

Surprising Fact

Bankman-Fried said he has “close to nothing” left in personal wealth after the FTX collapse because he reinvested his money in the company, and repeated a claim he made to Axios that all he has now is a bank account with about $100,000 left in it.

Forbes Valuation

Forbes estimates Bankman-Fried’s wealth peaked at around $26.5 billion, which was almost solely tied up in FTX and FTT.

Key Background

Just months before FTX’s collapse, Bankman-Fried was hailed by some as a leader at the forefront of an industry that sought to revolutionize the world of finance. He headed the Bahamas-based FTX cryptocurrency exchange, which became known for its high-profile endorsement deals that included partnerships with A-list celebrities and superstar athletes. But the collapse in cryptocurrency prices earlier this year would doom FTX and its sister trading firm, Alameda Research, which reportedly used FTX’s cryptocurrency FTT as collateral to take out billions of dollars worth of loans to buy stakes in startups. Alameda found itself with massive funding gaps after the crypto crash, but FTX reportedly opted to bail out the struggling firm by lending it billions of dollars worth of customer assets. The extensive ties between the two firms became public knowledge in a November 2 CoinDesk report that revealed a large portion of Alameda’s balance sheet was made up of FTT, which is issued by FTX. The bombshell revelations—and crypto exchange Binance’s decision to sell its FTT position—alarmed customers who rushed to take out money, leading the exchange to face insolvency and file for bankruptcy on November 11, and prompting Bankman-Fried’s resignation as CEO. John Ray, who was appointed CEO to oversee bankruptcy proceedings, has called FTX’s financial situation and lack of controls the worst he’s ever seen in his career. Ray notably led Enron after the Texas-based energy company filed for bankruptcy in 2001.

What To Watch For

FTX is under investigation by both the Justice Department and Securities and Exchange Commission, according to multiple reports.

Big Number

$3.1 billion. That’s how much FTX claims it owes its 50 biggest creditors, but there are believed to be more than 1 million creditors in all.