Striking a contrite tone, former FTX CEO Sam Bankman-Fried said he “didn’t do a good job” at upholding his responsibilities to regulators, customers, and investors in a hotly anticipated conversation with CNBC’s Andrew Ross Sorkin at the Dealbook Summit.
“I didn’t ever try to commit fraud on anyone,” Bankman-Fried said. “I saw it as a thriving business and I was shocked by what happened this month.”
“I’ve had a bad month,” Bankman-Fried added later.
“We completely failed on risk,” Bankman-Fried continued. “That feels pretty embarrassing, in retrospect.”
Bankman-Fried appeared by video feed from the Bahamas, Sorkin said. “I’ve been in the Bahamas for the last year,” Bankman-Fried said when asked about why he remained in the island nation.
Sorkin asked Bankman-Fried what motivated his acquisitions in the crypto industry, given the size of Alameda’s borrowing from companies Bankman-Fried intended to acquire.
Bankman-Fried claimed that he believed that by the middle of 2022, Alameda had repaid all lines of credit to various borrowing desks. But Alameda still owes BlockFi over $670 million, according to court filings.
“What are your lawyers telling you right now? Are they suggesting it’s a good idea for you to be speaking?” Sorkin asked the former billionaire.
“No, they’re very much not.”
“The time that I really knew there was a problem was November 6,” Bankman-Fried said, after Alameda’s sizable FTT position was exposed by Coindesk. “When we looked at that, there was a potential serious problem.”
“Alameda had taken a huge hit” by that point. “We were seeing a run on the bank start,” Bankman-Fried said.
“I was nervous [when] the Alameda balance sheet” was exposed by Coindesk, Bankman-Fried said, but expected the damage was going to be limited to Alameda, not an “existential” crisis for FTX.
Sorkin asked Bankman-Fried why FTX and Bankman-Fried even had access to customer money.
“I wasn’t running Alameda, I didn’t know exactly what was going on, I didn’t know the size of their position,” Bankman-Fried said. “A lot of these are things I’ve learned over the last month [in the days leading up to bankruptcy.]”
New leadership at FTX said that Bankman-Fried exercised significant control over the entire empire.
Sorkin pressed Bankman-Fried on Alameda’s gambling on questionable cryptocurrencies, reading a letter out from an investor who lost his life savings of $2 million.
“The U.S. platform is fully solvent and funded,” Bankman-Fried claimed. “I believe withdrawals could be opened up today and be made whole.”
“Can I ask you about the drugs?” Sorkin said. “It’s funny hearing this. I have half a glass of alcohol a year,” Bankman-Fried responded.
The FTX founder repudiated claims of wild partying and off-label drug use, saying that FTX functions consisted of “board games,” or “dinner parties.”
Bankman-Fried claimed he was unaware of the Alameda exposure. In 2019, he said, 40% of FTX’s volume was from Alameda. By 2022, Bankman-Fried claimed, that number was down to 2%, which led him to believe that FTX’s exposure was lessened.
Sorkin continued to press Bankman-Fried on the lending of customer assets. Bankman-Fried demurred.
“In 2018, FTX didn’t have bank accounts,” Bankman-Fried said as justification for why users were asked to wire funds to an account in Alameda’s name instead of directly to FTX.
Bankman-Fried has engaged with the media only sporadically. “F*** regulators,” he told a Vox reporter in a Twitter message.
“I f***** up,” he wrote in another Tweet.
FTX was once hailed as the poster child of responsible crypto. Regulators and lawmakers looked to Bankman-Fried as the future of crypto regulation, a reputation that Bankman-Fried cultivated through appearances before Congress and deepened through generous political contributions.
Bankman-Fried was already known as one of the largest donors to Democratic candidates. He claimed in a recent interview that he gave equally generously to Republican causes, through so-called “dark pool” contributions.
Reporters, Bankman-Fried said, “freak the f*** out if you donate to Republicans.”