Sam Bankman-Fried, the founder of the FTX cryptocurrency exchange, made his first appearance on Wednesday since his business empire imploded this month. of what was going on within his crypto businesses.
In a live interview at The New York Times’ DealBook conference in Manhattan, Mr. Bankman-Fried blamed “massive management errors” and shoddy accounting for his $32 billion company’s collapse, prompting civil and criminal investigations.
Those investigations are focused on whether FTX broke the law by lending its clients’ money to a trading firm, Alameda Research, which Mr. Bankman-Fried also owned. Speaking via a video feed from the Bahamas, where FTX was based, the 30-year-old said he was “not knowingly mixing funds.” At another point, he said, “I wasn’t quite sure what was going on.”
Mr. Bankman-Fried also took responsibility for the collapse. “Look, I screwed up,” he said. “I was CEO”
FTX fell apart practically overnight after failing to sustain a run on deposits that left the company with an $8 billion hole in its accounts. Within a week, the crypto exchange filed for bankruptcy.
Traders have lost billions of dollars they had stored on the platform, which served as a marketplace for crypto enthusiasts to buy and sell tokens. Companies associated with FTX are also on shaky financial footing. On Monday, crypto lending firm BlockFi filed for bankruptcy, blaming its links to FTX.
The aftermath of FTX’s demise
The sudden collapse of the crypto exchange has stunned the industry.
- A spectacular rise and fall: Who is Sam Bankman-Fried and how did he become the face of crypto? The Daily charted the spectacular rise and fall of the man behind FTX.
- Holding on to power: Emails and text messages show how FTX lawyers and executives struggled to convince Mr. Bankman-Fried to relinquish control of his collapsing company.
- Collateral damage: BlockFi, a cryptocurrency lender that catered to ordinary investors eager to be a part of the crypto frenzy, filed for bankruptcy on Nov. 28, struck down by its financial ties to FTX.
- A symbiotic relationship: Mr. Bankman-Fried’s built FTX in part to support the trading activities of Alameda Research, its first company. The ties between the two entities are now coming under scrutiny.
Mr. Bankman-Fried, who became a billionaire when FTX boomed and was seen as a child prodigy, is facing significant legal troubles. The Justice Department and the Securities and Exchange Commission are investigating FTX’s transfer of funds to Alameda. Alameda CEO Caroline Ellison told staff this month that the trading company had dipped into FTX client funds to fund its own trading activities, The Times and others reported.
Mr. Bankman-Fried has since come under heavy criticism. In court filings, FTX’s new CEO, who is managing the company’s bankruptcy, said he had never seen “such a complete failure of the company’s control” and listed a series of “unacceptable management practices.”
On Wednesday, Treasury Secretary Janet L. Yellen called FTX’s collapse a “Lehman moment” for the cryptocurrency industry, referring to the failure of Wall Street bank Lehman Brothers at the start of the 2008 financial crisis. that she viewed cryptocurrencies with skepticism, calling them “highly risky assets” and adding that she was thankful their recent volatility had not spilled over to the mainstream banking sector.
For someone potentially facing criminal charges, Mr. Bankman-Fried has been surprisingly willing to speak publicly. As the crisis unfolded in early November, he posted a series of apologetic tweets — statements his lawyers later rebuked him, he said. Two days after FTX’s bankruptcy filing this month, he spoke to The Times for more than an hour about how he had managed his business empire while dodging questions about his company’s use of client money.
In the video stream at the DealBook conference, Mr. Bankman-Fried, dressed in a black T-shirt, was sometimes fidgeting, as he often does during interviews. He said he was speaking publicly against the advice of his lawyers, who had ordered him to keep quiet and “retreat to a hole”. He said he had decided to ignore their advice.
“That’s not who I am,” he said. “I have a duty to talk.”
The relationship between FTX and Alameda has long been a source of criticism. Alameda traded heavily on the FTX platform, meaning it sometimes profited when FTX’s other clients lost money, creating a conflict of interest. Mr. Bankman-Fried lived with Mrs. Ellison in a penthouse in the Bahamas, and at times the two were romantically involved.
Mr. Bankman-Fried claimed he was “nervous about a conflict of interest” with Alameda, and parted ways with it for that reason.
In addressing the impact of the company’s collapse on his own future, he was undervalued. “I’ve had a bad month,” he said at one point to laughter from the audience.
Mr Bankman-Fried also said the crisis had reduced his net worth to about $100,000. “I have no hidden money,” he said. “I put everything I had into FTX.”
FTX has also come under scrutiny for how it has spent money, including spending $300 million on Bahamas real estate. At the conference, Mr. Bankman-Fried defended the spending, saying he was trying to recruit top talent to the Bahamas.
But he declined to speak in detail about his possible criminal liability. “There is a time and a place for me to think about myself and my own future,” he said. “I don’t think this is it.”
The wide impact of FTX’s collapse could be seen outside the conference room, where a small group of protesters gathered; one was carrying a sign that said Mr. Bankman-Fried has “robbed us all.”
But as Mr. Bankman-Fried spoke, an ad flashed on top of a building visible beyond the auditorium. “Buy stuff,” it said. “Get crypto rewards.”
Ryan Mac reporting contributed.
