Former FTX CEO Sam Bankman-Fried took part in an interview today with the New York Times today during the publication’s DealBook Summit.
During the conversation, Bankman-Fried provided NYT interviewer Andrew Ross Sorkin with deeper insight into the collapse of his cryptocurrency exchange.
Bankman-Fried began the interview by explaining that Alameda Research, FTX’s sister company, acted as a margin trading or derivatives platform.
He said that Alameda had roughly 10% leverage last year, but that market crashes reduced the value of its assets. Though Alameda was “still under two times leverage as of a month ago,” Bankman-Fried said, more than $10 million was “wiped off in a matter of days,” leaving FTX unable to liquidate that position and generate the money owed.
When questioned on how this affected FTX, and whether funds were co-mingled between the two firms, Bankman-Fried insisted that he “didn’t knowingly commingle funds.”
Rather, he said that he believes Alameda had margin positions with various crypto borrowing and lending firms. After many of those firms collapsed this summer, Alameda moved those positions to FTX.
Bankman-Fried also admitted to a “substantial discrepancy” between financial audits and the company’s true situation. He said that the two companies were ultimately “tied together substantially more than I would have ever wanted.”
He also added the disclaimer: “I wasn’t running Alameda, I didn’t know exactly what was going on,” noting that he learned many of these details over the past month.
When asked about the $515 million of funds that went missing shortly after FTX’s bankruptcy filing, Bankman-Fried said that he had been cut off from systems at that point and therefore does not have full knowledge of the situation.
However, he speculated that one portion of funds has been seized by FTX’s U.S. team and put in custody and that another portion has been taken by Bahamian regulators. He said that a third portion has been improperly accessed by individuals who are still unknown.
On whether his company had been given instructions to pursue further regulatory compliance, Bankman-Fried admitted that there were such instructions. However, he said that FTX was already spending an “enormous amount of our energy” on compliance prior to its collapse and that the core issue instead was one of risk management.
Bankman-Fried also commented on his decision to remain in the Bahamas and discussed whether he believes that he is permitted to leave the country and return to the U.S.
“To my knowledge, I could,” Bankman-Fried said. He said that he has watched various government hearings and that he “would not be surprised” if he travels to the United States to talk to representatives.
He added that he is not immediately concerned about criminal liability. “What matters here is the millions of customers… I don’t think that what happens with me is the important part of that,” Bankman-Fried said.
He commented on his personal relationship with other employees in his network, stating that he knows Alameda’s personnel “decently well.” He denied living with those individuals in a shared Bahamas penthouse for any significant amount of time.
“Most of Alameda was not there,” he said. “I don’t live there now and I haven’t lived there for most of the time. I did live with one or two members of Alameda for a little while.”
Bankman-Fried also denied recreational drug use among the employees. “There were no wild parties here. When we had parties, we played board games,” he said, stating that some people drank a small amount of beer.
He insisted that he saw no illegal drug use in the office or at parties but said that he personally used medications prescribed for focus and concentration.
Bankman-Fried admitted that his lawyers have advised him not to talk to the public. “The classic advice is, don’t say anything, you know, recede into a hole,” he said, while also explaining that he feels “a duty to talk to people and… a duty to explain what happened.”
Though Bankman-Fried insisted that he has always been truthful, he admitted that there were times when he acted “as a representative [or] marketer for FTX” by portraying the exchange as exciting without fully disclosing risks.
He concluded that his future is uncertain, but that he aims to be as helpful as possible to customers and regulators.
“I can’t promise anyone anything,” he admitted, “I think there’s a chance that customers could end up made a lot more whole…if there was a really strong concerted effort…I think there’s a shot for real value.”
Bankman-Fried added that he now has “close to nothing” in terms of finances, with a single credit card plus personal funds amounting to $100,000 in a bank account. He said he had no hidden funds.
Bankman-Fried also suggested at various points that FTX’s U.S. branch should be operational. “To my knowledge, that’s fully solvent [and] fully funded, he said. “I believe that withdrawals could be opened up today.”
Nevertheless, the exchange shows no sign of reopening its services to customers.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other digital assets.
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