Sam Bankman-Fried, the former CEO and owner of collapsed cryptocurrency exchange FTX sat down for an interview at The New York Times’ DealBook Summit, where he attempted to explain to journalist Andrew Ross Sorkin how his company ended up with a multibillion-dollar hole on its balance sheet before the company filed for bankruptcy.
Bankman-Fried said he was moving forward with the interview, which was scheduled before FTX’s collapse, against the advice of his attorneys because he has “a duty to talk and to explain what happened.”
FTX collapsed after its sister investing site, Alameda Research, lost major positions, thought to be related to the LUNA collapse earlier this year. FTX customer funds were allegedly used to cover the losses and there was reportedly no distinction between Alameda Research and FTX funds.
The bankruptcy lists over 100 customers and up to a million creditors, marking some assets as missing and noting there is very little documentation. The new CEO called the situation at FTX a mess and said he had never seen “such a complete failure of corporate control.”
During the talk, Bankman-Fried said he did not realize there was a problem with FTX’s financials until November 6, the same day Binance CEO Changpeng Zhao, aka “CZ,” publicly stated he was liquidating the company’s holdings of FTT, the internal token of FTX.
While he admitted he made mistakes as the company’s CEO, Bankman-Fried remained adamant that it was not intentional. “I didn’t ever try to commit fraud on anyone,” the 30-year-old said.
He also said he didn’t “knowingly commingle funds” and was not running Alameda since he “was nervous because of the conflict of interest of being too involved.” However, it has been reported that Alameda Research and FTX shared a bank account, making it difficult to believe the owner of both companies would be unaware of that situation.
Though Bankman-Fried started the interview saying he was “responsible” for what happened at FTX, he did spend part of the chat deflecting blame onto customers, explaining that one reason for the collapse is that they allowed customers to trade on margin, and that FTX was obligated to cover those losses.
However, US Securities laws dictate every non-bank brokerage firm holds $1 in assets per every dollar of margin it extends to its traders. That does not appear to be the case with FTX, but it should be noted that parts of FTX were based in the Bahamas and Antigua, complicating the legal situation.
FTX also recently spent $300 million on real estate in the Bahamas, something Bankman-Fried said was to attract top tech talent. FTX’s attorneys at the bankruptcy hearings said the purchases were primarily homes and vacation properties for executives in the company.
The former CEO also doubled down on his assertion that FTX US is still solvent and that customers there will be made whole; however, FTX US was included in the bankruptcy filings and customer withdrawals there have also been halted. On Monday, FTX Japan stated its assets are safe in hand and are in excess of its liabilities.
Bankman-Fried also underscored he remains hopeful of reviving FTX and making customers whole, referencing the 2016 Bitfinex hack that amounted to some $76 million in stolen funds - far less than what FTX owes. It remains unclear how Bankman-Fried entends to deliver on his promise to "make customers whole."
Throughout the interview, Bankman-Fried insisted everything that happened at FTX was the result of mistakes and not intentional fraud. “There was no person who was chiefly in charge of position or risk of customers on FTX and that feels pretty embarrassing in retrospect,” he said.
Bankman-Fried also failed to give any insight into why or how $515 million worth of cryptocurrency was transferred out of FTX’s account days after the company filed for bankruptcy. He instead gave a list of possibilities, including “improper access to assets” which presumably indicates either an external hack or internal theft.
When asked how much money he had left and if he had hidden any away, Bankman-Fried said he does not have any secret funds and that he has “close to nothing” left, noting he has one working credit card left and about $100,000 in the bank.
At one point during the event Bankman-Fried lamented that he “had a bad month,” a remark that drew instant laughter from the crowd that paid $2,499 a ticket to watch the day’s speakers. There was no camera on the small crowd of protesters outside to see if they laughed at the joke.
One protester spotted outside the venue was seen holding a sign that read “SBF & Gary G Robbed us all,” presumably referring to Bankman-Fried and US Securities and Exchange Commission Chair Gary Gensler, who some Twitter users have allegedly linked to Caroline Ellison’s family, the CEO of Alameda and former girlfriend of Bankman-Fried.