Bankman-Fried Denies Trying to Commit Fraud at Fallen FTX Empire

In Business
2022-11-30 23:52:11Z
By Bloomberg

(Bloomberg) -- Sam Bankman-Fried, the disgraced founder of the bankrupt FTX crypto empire, denied trying to perpetrate a fraud while admitting to many errors at the helm of the company.

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"I made a lot of mistakes," the 30-year-old said Wednesday by video link at the New York Times DealBook Summit. "There are things I would give anything to be able to do over again. I didn't ever try to commit fraud on anyone."

He was speaking in an interview with Andrew Ross Sorkin, a columnist for the news organization, who said Bankman-Fried was joining from the Bahamas.

Bankman-Fried's participation sparked controversy given the damaging fallout from the collapse of the FTX exchange and sister trading house Alameda Research. Among the outstanding questions are 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 stoked such concerns.

Bankman-Fried told the summit that he "didn't knowingly commingle funds." At the same time, he said that FTX and Alameda were "substantially more" linked than intended and that he failed to pay attention to the trading house's margin position, describing it as "too large."

He said he wasn't running Alameda and added that we was "nervous about a conflict of interest." No person was in charge of position risk at FTX, he said, describing the lack of oversight of risk and conflicts as a mistake.

Out of Control

The comments shed little light on the question of where client funds ended up as 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 firm in bankruptcy, John J. Ray III, has painted a picture of FTX as a mismanaged, largely out-of-control company bathed in conflicts and lacking basic accounting practices, calling it the worst failure of corporate controls he'd ever seen.

Bankman-Fried faces a complex web of lawsuits and regulatory probes into alleged wrongdoing. Some observers speculate 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. Bankman-Fried said there were no wild parties and that he saw no illegal drug use. He added that he's been prescribed drugs over time to help with focus and concentration.

Crypto Contagion

The digital-asset sector is braced for widening contagion from FTX, which once boasted a $32 billion valuation before sliding into bankruptcy on Nov. 11. 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 Inc., filed for bankruptcy Monday after being buffeted by the wipeout. Embattled brokerage Genesis is striving to avoid the same fate.

BlackRock Inc. Chief Executive Larry Fink said earlier at the DealBook summit that most crypto companies will probably fold in the wake of FTX's collapse. The world's biggest asset manager was among firms stung by the chaotic unraveling of Bankman-Fried's tangled web of 100-plus FTX-related entities.

Bankman-Fried has provided convoluted and incomplete explanations 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.

Failed Controls, Hack

As if such travails weren't enough, the exact breakup of a $662 million outflow from FTX as it tumbled into bankruptcy remains a mystery. Bankman-Fried said in the summit interview that there was improper access to FTX after its spiral.

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 giant Lehman Brothers in 2008.

Crypto markets have stabilized 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% this year, hit by tightening monetary policy and a series of crypto blowups of which FTX is the most spectacular.

--With assistance from Allyson Versprille, Jenny Surane, Gregory Korte and Annie Massa.

(Updates with more comments from Bankman-Fried from the sixth paragraph.)