By EARYEL BOWLEG
Tribune Staff Reporter
ebowleg@tribunemedia.net
FORMER FTX CEO Sam Bankman-Fried said he did not try to commit fraud and unknowingly commingled funds of his company’s customers with his hedge fund Alameda Research.
Mr Bankman-Fried gave a nearly hour long interview with journalist Andrew Ross Sorkin yesterday at the DealBook Summit in New York City. Live from The Bahamas, he opened up about the crypto giant’s downfall and his transgressions that led to it.
This conversation is the highest profile sit down the embattled former billionaire has given publicly since the collapse of the crypto exchange.
FTX, Alameda Research, and “dozens other affiliated companies” filed a bankruptcy petition in Delaware last month.
During the interview, Mr Bankman-Fried was remorseful about the turn of events.
“At the end of the day, I was CEO of FTX and that means whatever happened, why ever it happened - I had a duty. I had a duty to all of our stakeholders, to our customers, our creditors. I had a duty to our employees, to our investors, and to the regulators of the world to do right by them,” he said.
“To make sure the right things happened at the company and clearly I didn’t do a good job at that. “Clearly I made a lot of mistakes, things I’d give anything I would do over again. I didn’t ever try to commit fraud on anyone. I was excited about prospects. I was excited about the prospects of FTX a month ago. I saw it as a thriving growing business. I was shocked by what happened this month and you know, reconstructing it.”
FTX’s swift demise came after CoinDesk, a publication which reports on cryptocurrency, broke the news in early November about a leaked document that appeared to show that Alameda Research, Mr Bankman-Fried’s cryptocurrency trading firm, held an unusually large amount of FTT tokens.
FTT tokens were created by FTX.
It is believed that the US Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission are probing the handling of FTX customers’ funds.
Pressed on the issue of mixing funds, the 30-year-old answered: “I unknowingly commingled funds. And again – you have the margin trading you have, you know, customers borrowing from each other - Alameda is one of those.
“I was frankly surprised by how big Alameda’s position was which points to another failure of oversight on my part and failure to appoint someone to be chiefly in charge of that but I wasn’t trying to co-mingle funds.”
Mr Sorkin expressed the opinion that Alameda and FTX appeared to have a connection from the beginning and never stopped.
Mr Bankman-Fried stated: “Well, I think it had been, in some ways, reducing. I mean, when you throw back to 2019, Alameda and FTX were very connected in a number of ways. You know, one of these it was that Alameda was the primary liquidity provider on FTX. It was, you know, 40 something percent of volume, it was the backstop liquidity provider. And you scroll forward to 2022, it was down to 2 percent of volume, we had a lot of backstop liquidity providers.
“But it still had a big margin position on and I was failing to pay nearly enough attention to positions and positional risks on the exchange, and to Alameda’s in particular. And I also, frankly, made a mistake that I feel pretty embarrassed to have made. And a lot of things are, but I substantially underestimated what the scale of a market crash could look like and what the speed of it could look like.”
However, he attempted to distance himself from Alameda.
“I wasn’t running Alameda. I didn’t know exactly what’s going on. I didn’t know the size of their position. A lot of these are things I’ve learned over the last month that I learned as I was sort of frantically digging into this on November 6, November 7, November 8. And, obviously, that’s a pretty big mistake I made. That’s a pretty big oversight that I wasn’t more aware, I think I was, you know, I was nervous because of the conflict of interest about being too involved, and obviously, that shouldn’t have meant that I didn’t have real oversight, or that really shouldn’t have meant that I failed to point anyone to be in charge of that oversight, that relationship,” Mr Bankman-Fried explained.
Another concern he was pushed to answer was the New York Times’ report of $515 million suspicious transfers from FTX after the company’s bankruptcy filing.
He indicated there may have been some improper access of assets.
“I will caveat this by saying at that point, I was being cut off from systems. And so I’ll give you the answer to the extent that I know it, which is that I believe that a few different things happened within a short period there,” Mr Bankman-Fried told the audience.
“I think that the US team took action to seize some of the assets and put it in custody for the exchange. I believe it’s been announced that the Bahamian regulators took some of the assets into safekeeping as well around that same time.
“…In addition to both of those also there was some actually improper access of assets on the exchange. And I don’t know the details of that. I don’t have the resources to trace through exactly what happened there. And I don’t know who is behind that third part.”
Last month, the Bahamas Securities Commission took action to freeze the assets of FTX Digital Markets and related parties. It was further stated the commission also suspended the registration and applied for the appointment of a provisional liquidator of FTX Digital Markets Ltd.
Mr Bankman-Fried spoke about the commission but did not give any details.
“So I can’t discuss specifics, but I will note that prior to Chapter 11 having been filed the Bahamian authorities had placed FTX Digital Markets, the Bahamian entity which is the primary operating entity of FTX International, under supervision of a JPL system in The Bahamas with oversight from the Securities Commission of the Bahamas, and, you know, or more to my knowledge, taking actions to protect FTX’s clients and customers there.”
FTX injected millions of dollars into The Bahamas and one way the crypto currency exchange did so was through real estate. In fact, a Bahamian realtor estimated $250m and “probably more” was spent on the company acquiring New Providence real estate.
Much has been discussed in the media about this and Mr Bankman-Fried clarified the purchase of the properties. Particularly reports that his parents apparently had been provided with a luxury vacation home.
He said: “So I don’t know the details of the house for my parents, but I knew that it was not intended to be their long term property - it was intended to be the company’s property. I don’t know how that was papered in and I think that was where it was and will end up. I think they may have stayed there while working with the company sometime over the last year.
“When you look at the rest of it, there were a lot of property purchases in The Bahamas. You know, the reason for that is we had basically a hundred Silicon Valley, you know, top Silicon Valley employees come down here to work for FTX.
“We were trying to incentivize that and to, you know, make sure that they had an easy way to find a comfortable life so they’d be willing to move and help build out the product. And so I, you know, those 100 people put together here did end up buying a substantial amount of property. And you feel kind of, I feel bad about some of how those investments turned out for them.”
Asked why he was in The Bahamas, Mr Bankman-Fried has been in the country for the last year running FTX.
“You know, I’ve been running FTX Digital Markets, our primary operating entity down here with Bahamian regulators and, you know, and others in contact, and right now I’m looking to be helpful anywhere I can with any of the global entities that would want my help.”
He did not rule out the possibility of going to the United States to answer questions.
“I’ve thought about it and I’ve seen a lot of the obviously of the hearings that have been happening. I you know, would not be surprised if you know, some time I am, you know, up there talking about what happened to our representatives or, you know, wherever else is most appropriate.”