Sam Bankman-Fried (SBF), the fallen CEO of collapsed crypto exchange FTX, appeared for a live interview on Wednesday at the DealBook Summit, hosted by the New York times. SBF’s interview at the DealBook summit is his first live public appearance since FTX collapsed. SBF joined the summit virtually and talked about the collapse of FTX calling it his “duty” to talk about the situation, ignoring legal advice from his lawyers not to talk.
SBF said he was not responsible for the fall of FTX and Alameda Research, the exchange’s trading arm. SBF said he did not try to commit fraud on anyone and blamed the collapse of FTX on “failures in management.”
Was it Fraud?
New York Times journalist Andrew Sorkin read emails he had received from customers of FTX who lost their funds in the implosion of the exchange. Andrew read a letter with the subject line “Sam Bankman-Fried stole $2 million from me.” In the letter, the customer said he lost his life savings and cited trades by Alameda Research in which it had long positions in certain coins traded using customers’ funds – about $10 billion. The user, in his email, urged Andrew to ask SBF if he thinks what happened was a fraud. In his response, SBF said he was deeply sorry about what happened and made a distinction between the US and international platforms of FTX. SBF said the US-based platform of FTX remains fully solvent, to his knowledge, and believes that withdrawals on FTX.us could be opened up today and everyone could be “made whole.” On the international platform of FTX, SBF said the number of market crashes that had occurred in the past year drove down the value of assets and drove up leverage.
SBF was confronted with the question of how Alameda got the loan which it used on risky trades on FTX. Andrew cited the view about co-mingling of users’ funds and read FTX’s terms of service to SBF which reads: “None of the digital assets in your account are the property of, or shall or maybe loaned to, FTX Trading. FTX Trading does not represent or treat Digital Assets in User Accounts as belonging to FTX Trading.” SBF defended his stance on the issue of commingling users’ funds by calling it a massive failure of oversight of risk management, stating that he unknowingly commingled funds.
SBF’s Disinformation and FTX’s Missing Funds
When news of potential insolvency at FTX first broke, SBF took to Twitter to publish tweets that countered the claims of impending insolvency. In the live interview, SBF was asked at what point he knew there was a problem at FTX; he claimed the time he really knew there was a problem was on November 6. However, in now-deleted tweets which SBF published on November 7, he reiterated that “FTX was fine and assets are fine” and suggested that a competitor was trying to go after FTX with false rumors.
When asked about the missing funds – over $450 million worth of digital assets – that got moved from FTX moments after the exchange filed for a chapter 11 bankruptcy on November 11, SBF said he could not provide many details because at the point of the supposed hack or movement of funds, he had limited access to FTX’s systems. He said to the extent that he knows about the incident, the FTX.us team and Bahamian regulators had seized some of the digital assets; he further cited that some improper access to FTX systems also occurred.
Asked how concerned he was about criminal liability, SBF stumbled over his words, trying to find the best words to answer the question. He said that there is going to be a time and place for him to think about himself and his future. “Look, I’ve had a bad month,” he said, eliciting laughter from the audience.
The hour-long interview can be found on the New York Times Events YouTube page.
FTX established its headquarters in the Bahamas last year after registering under the new crypto regulation of the Bahamas, known as the Digital Assets and Registered Exchanges Act, 2020 (DARE Act); in the wake of the implosion, a criminal investigation into FTX is underway in the Bahamas. Reports state that senior executives of FTX and SBF’s parents bought at least 19 property in the Bahamas worth nearly $121 million, and another $300 million was spent on the purchase of homes and vacation property by one of FTX’s arms.
A discussion between US lawmakers and the Chairman of the Commodity Futures Trading Commission (CFTC) Rostin Behnam is under way. The hearing is titled “Lessons Learned From the FTX Collapse, and the Need for Congressional Action.” It is speculated that Rostin Behnam will be grilled over his frequent meetings with FTX staff including Sam-Bankman Fried, and whether the CFTC could have prevented the FTX crash.
Live coverage of the hearing can be found here.