Sam Bankman-Fried, the disgraced cryptocurrency executive, issued his first detailed response on Thursday to the criminal charges filed against him last month, arguing that the millions of customers of his collapsed exchange, FTX, could still get their money. get back.
In a statement published on Substack, Mr. Bankman-Fried that “very substantial recovery potential remains available”.
“I did not steal money and I certainly did not stash away billions,” he wrote. “Almost all of my assets were and still are usable to support FTX clients.”
His statement came a day after the lawyers overseeing FTX’s bankruptcy said in court they had recovered at least $5 billion in funds. Mr. Bankman-Fried cited that announcement to try to bolster his claim that FTX customers can still be made “substantially whole”. It was not clear whether he had vetted his statement with his legal team before publishing it.
FTX filed for bankruptcy in November after a run on customer deposits exposed an $8 billion hole in its accounts. Mr Bankman-Fried, 30, was subsequently arrested last month at his home in the Bahamas, where FTX was based, and swiftly extradited to the United States. Federal prosecutors in Manhattan have charged him with fraud, money laundering and campaign finance violations.
Authorities allege that Mr. Bankman-Fried siphoned off billions of dollars in customer deposits from FTX and used the funds to buy luxury real estate, invest in other businesses, make political contributions and fund cryptocurrency trading at Alameda Research, the hedge fund he also owned.
The FTX founder was released last month on a $250 million bond under strict conditions that require him to remain confined at his parents’ home in Palo Alto, California. In a brief trial last week in New York, he pleaded not guilty to the criminal charges.
What you need to know about the collapse of FTX
What is FTX? FTX is a now-bankrupt company that used to be one of the world’s largest cryptocurrency exchanges. It enabled customers to trade digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency known as FTT. Based in the Bahamas, the company built its business on risky trading options that are not legal in the United States.
A spokesperson for Damian Williams, the U.S. Attorney for the Southern District of New York who is prosecuting Mr. Bankman-Fried, declined to comment.
A spokesman for Mr Bankman-Fried and his legal team declined to comment.
Mr Bankman-Fried’s statement on Thursday echoes a story he has previously put forward – and which US prosecutors, regulators and industry experts have flatly rejected. The post provided a detailed timeline of the financial situation at Alameda, which was closely linked to FTX, arguing that the company was losing money due to a market crash it was not prepared for.
Mr Bankman-Fried’s statement also attributed FTX’s failure in part to an attack by its biggest rival, Binance.
“No money was stolen,” he wrote.
But while outlining Alameda’s finances, Mr. Bankman-Fried also claimed he had not run the company “for the past several years” and did not have access to all financial information. Regulators and prosecutors have argued that he was, in fact, deeply involved in Alameda’s management and orchestrated a system that allowed the company to borrow, essentially, an unlimited amount of money from FTX’s pool of customer deposits.
His statement did not address the guilty pleas of two of his former top executives, Caroline Ellison and Gary Wang, both of whom are cooperating with prosecutors. Mrs. Ellison, who once had a relationship with Mr. Bankman-Fried, was the head of Alameda when the company collapsed, and Mr. Wang co-founded with Mr. Bankman-Fried FTX op.
On Wednesday, an FTX bankruptcy attorney told a federal judge that the exchange had recovered more than $5 billion in cash and crypto assets — significantly more than the company previously said it had on hand. The announcement raised hopes that FTX might be able to pay back some money to its millions of creditors and customers around the world.
Andrew Dietderich, an attorney at Sullivan & Cromwell, also told the judge overseeing FTX’s bankruptcy in Delaware that the legal team had identified more than nine million customer accounts with the crypto exchange.
In an email after the bankruptcy hearing, Mr. Dietderich said that of the $5 billion in newly recovered assets, about $1.7 billion was in cash.
He said the newly recovered assets did not include about $20 million in cash and $484 million in stock in the online trading company Robinhood, which federal prosecutors seized from a separate company that Mr. Bankman-Fried in Antigua. He also said FTX’s new management believes that the Robinhood shares and seized money should be distributed to FTX’s creditors.
FTX is also exploring whether it can sell about $4.6 billion in investments the company has made in other companies, primarily crypto companies.
The aftermath of FTX’s demise
The sudden collapse of the crypto exchange has stunned the industry.
In his statement on Thursday, Mr Bankman-Fried said he had previously offered to “transfer almost all of my personal shares in Robinhood to clients” if FTX agreed to help him pay his legal bills. He recently filed a motion in bankruptcy court arguing that those shares were his personal property and that he had to sell some of them to pay his lawyers.
Mr. Bankman-Fried also blames Sullivan & Cromwell, who had done legal work for FTX before the stock market crash, for being pressured to bankrupt the company and by a restructuring lawyer, John Jay Ray III to have it taken over from him.
In his statement, Mr. Bankman-Fried included extracts from what appear to be financial statements and balance sheets for FTX. Mr Ray attacked the former management of FTX in bankruptcy court, saying there was “a complete failure of the company’s control” and that the company’s financial statements should not be trusted.
Moira Penza, a former federal prosecutor who now has a private practice, said Mr. Bankman-Fried was a gift to prosecutors and certainly a headache for his legal team.
“The strongest evidence a prosecutor can have is the defendant’s own words, and Bankman-Fried is giving the government a gift,” Ms Penza said. “If I were to pursue the case, I would want him to keep talking, and if I were to defend him, I would tell him to shut up.”
After FTX collapsed, Mr. Bankman-Fried gave a series of interviews about the implosion. But since he was released on bail last month, he’s been relatively quiet, apart from one few tweets, until now. He has had a handful of visitors to his parents’ house, including author Michael Lewis, who is writing a book about him; the crypto YouTube personality Tiffany Fong; and a reporter for the online publication Puck.
In his position, Mr Bankman-Fried said he had hoped to respond in detail to the allegations against him much sooner, beginning with testimony he intended to give to the House Financial Services Committee on Dec. 13.
“Unfortunately, the DOJ decided to arrest me the night before, anticipating my testimony with an entirely different news cycle,” he wrote, referring to the Justice Department.
