FTX founder Bankman-Fried denies trying to commit fraud at fallen crypto empire

FTX founder Sam Bankman-Fried appearing virtually at The New York Times’ DealBook Summit on Nov 30, 2022. PHOTO: NYTIMES

PORTLAND, Oregon – Mr Sam Bankman-Fried, the disgraced founder of the bankrupt FTX crypto empire, has denied trying to perpetrate a fraud, while admitting to making many errors at the helm of the company.

“I made a lot of mistakes,” the 30-year-old said on Wednesday by video link at The New York Times’ DealBook Summit.

“There are things I would give anything to be able to do over again. I didn’t ever try to commit fraud on anyone.”

He was speaking in an interview with Mr Andrew Ross Sorkin, a columnist for the news organisation, who said Mr Bankman-Fried was joining from the Bahamas, his first public appearance since his US$32 billion (S$43.5 billion) crypto exchange collapsed in November.

Mr Bankman-Fried’s participation has sparked controversy given the damaging fallout from the collapse of FTX and sister trading house Alameda Research.

Among the outstanding questions are how Bahamas-based FTX ended up with an US$8 billion hole in its balance sheet and whether it mishandled customer funds, amid reports that FTX lent client money to Alameda.

Mr Bankman-Fried told Mr Sorkin that he did not knowingly commingle funds.

Some observers speculate that Mr Bankman-Fried’s public comments could be used against him in litigation. The fallen former FTX chief executive faces a complex web of lawsuits and regulatory probes into alleged wrongdoing.

The digital asset sector is bracing itself for widening contagion from FTX, which once boasted a US$32 billion valuation before sliding into bankruptcy on Nov 11.

FTX owes its 50 biggest unsecured creditors a total of US$3.1 billion and there may be more than a million creditors globally.

A crypto lender, BlockFi, filed for bankruptcy on Monday after being buffeted by the wipeout. Embattled brokerage Genesis is striving to avoid the same fate.

BlackRock CEO Larry Fink said earlier at the DealBook summit that most crypto companies will probably fold in the wake of FTX’s collapse. The world’s biggest asset manager was among firms stung by the chaotic unravelling of Mr Bankman-Fried’s tangled web of 100-plus FTX-related entities.

Mr Bankman-Fried has provided convoluted and incomplete explanations on social media and in interviews with other news outlets about what led to FTX’s woes. Advisers overseeing the ruins of his business have slammed non-existent oversight and the misuse of client funds.

FTX’s new chief executive officer John Ray III, a turnaround and restructuring expert who formerly oversaw the liquidation of Enron, told the bankruptcy court in the United States that he had never in his career “seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information”.

As if such travails were not enough, the exact break-up of a US$662 million outflow from FTX as it tumbled into bankruptcy remains a mystery.

US Treasury Secretary Janet Yellen, another speaker at the summit in New York, called the FTX debacle “the Lehman moment within crypto”, referring to the collapse of investment banking giant Lehman Brothers in 2008.

Dr Yellen described cryptocurrencies as “very risky assets” and said she was thankful that their recent volatility had not spilled over into the mainstream banking sector.

“I have been sceptical, and I remain quite sceptical,” Dr Yellen said.

The Biden administration over the last year has been studying the landscape of digital assets to develop a new regulatory framework.

Mr Bankman-Fried, who at one point was worth US$26 billion, said at Wednesday’s event that he now has “close to nothing”.

The fallen crypto mogul said he is left with just one credit card linked to a bank account with US$100,000.  

The Bloomberg Billionaires Index has dropped the value of his stakes in FTX and Alameda to zero. It has also removed his Robinhood Markets holding from his wealth calculation after a report that it was held through Alameda and may have been used as collateral for loans.

It is all but impossible to verify whether Mr Bankman-Fried is telling the truth, and the Bloomberg index may not have tracked all his assets.

A report in November said he had more than US$500 million with venture capital firms including Sequoia and was an investor in media start-up Semafor.

But if those assets were held through Alameda, they might have been wiped out by its losses. BLOOMBERG

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.