FTX’s Sister Firm, Alameda Research, Was Central to Collapse (Published 2022) (2024)

Sam Bankman-Fried, the cryptocurrency billionaire whose empire collapsed spectacularly this month and spawned at least two federal investigations, sat for a wide-ranging interview on Wednesday at The New York Times’s DealBook Summit, saying he “screwed up.”

Mr. Bankman-Fried seemed to frame the failure of his $32 billion cryptocurrency exchange, FTX, largely as a risk management problem that got out of hand. Here’s a look at his comments:

• Asked whether he was concerned about criminal liability, Mr. Bankman-Fried had a hard time finding his footing in what he wanted to say — fidgeting, stopping and starting. “There’s a time and a place for me to think about myself and my own future,” he said. “I don’t think this is it.”

• Although he didn’t explain how it could happen, Mr. Bankman-Fried said he believed customers could still be made “fully whole.” He himself said he had “close to nothing” and had not hidden any funds — and was left with one working credit card.

• Asked what happened to the $515 million that was suspiciously transferred from FTX after its bankruptcy filing, Mr. Bankman-Fried gave a list of possibilities, including “improper access of assets.”

• Mr. Bankman-Fried said his lawyers did not support his decision to speak, but he decided to sit for the interview. “I have a duty to talk and to explain what happened,” he said. He added that he “didn’t know of times” that he had lied, but said he tried to make FTX seem exciting. “I was as truthful as I’m knowledgeable to be,” he said.

Sam Bankman-Fried blamed the spectacular collapse of his cryptocurrency exchange FTX this month on poor oversight and client losses but denied he had knowingly committed fraud.

“I did not try to commit fraud on anyone,” he said at the DealBook Summit on Wednesday, in his first live interview since the multibillion-dollar fund filed for bankruptcy and regulators from a number of countries have started looking into the company’s collapse.

It was clear from the interview that SBF knows he could face civil and criminal liability over FTX, but he just cannot stop talking about it. What he's said can be used by investigators and prosecutors in jurisdictions around the world, but he can’t seem to relinquish control of the story or imagine a time when his explanations may be unwelcome.

Why would Sam Bankman-Fried want to speak to the world while under investigation?

The fallen founder of the cryptocurrency empire FTX took the question head on at the DealBook Summit on Wednesday, saying it was his “duty.”

The FTX founder Sam Bankman-Fried said on Wednesday that his parents “bore no responsibility” for the downfall of his crypto exchange and the trading arm, Alameda Research, which he founded.

“Anyone close to me, including my parents and employees and co-workers who fought with the company to push forward, they were hurt by this,” Mr. Bankman-Fried said. “They bore no responsibility for that. I feel really bad about that. I feel really grateful for the support my parents are still giving me throughout all of this.”

Now that the dust has settled from the interview, it seems clear SBF does not want any blame for FTX’s collapse to fall on his parents. Both are Stanford Law School professors and SBF has said they were influential in shaping his ethical framework. In the interview, he stressed that they “bore no responsibility” for what happened.

Another plank to the SBF defense: that it is possible FTX’s clients could end up getting their money back. Details were sparse on how, but he did cite the example of Bitfinex’s hack a few years ago. Bitfinex, though, ended up paying a $18.5 million fine in relation with how it responded to that hack. In that settlement, NY AG Letitia James said Bitfinex had acted “recklessly and unlawfully” with client funds.

A recap: Andrew asks whether the fact that FTX did not have a board is a problem. He says the problem is there were too many boards — of FTX Japan, Singapore, Europe, etc. As result, he says, there was no singular entity overseeing SBF’s global risk management.

SBF repeatedly mentioned clients' margin accounts, and said the problem at FTX was a lack of risk controls and allowing those margin accounts to grow too large. More evidence that SBF plans to shift the blame of FTX’s failure, not to Alameda’s bad bets or potentially unlawful shifting of funds, but to clients. The blame-the-customers defense is unlikely to quell the calls from crypto Twitter for his prosecution.

One night last year, Sam Bankman-Fried watched from Hong Kong as a global cryptocurrency crash played out on the six monitors arrayed before him.

His trading platform, FTX, specialized in the kind of futures trades that were accelerating the crash, with falling prices crushing the highly leveraged bets of bullish traders on FTX and other exchanges and setting off wave after wave of account liquidations.

SBF said, “I obviously wish that I spent more time dwelling on the downsides and less time thinking about the upsides.”

And just like that, the interview is over. SBF signs off.

“I was as truthful as I’m knowledgeable to be,” SBF said. “I don’t know of times when I lied.”

SBF says he think he has one working credit card left.

SBF says there were too many boards of directors and names the entities that did have boards, sometimes citing entities that were just bought by FTX within the last six months to a year …. They were not companies he created.

And he’s back.

SBF still seems reluctant to admit defeat and to believe that filing for bankruptcy was a mistake.

SBF just got cut off mid-answer to a question about boards.

SBF is still saying customers could be made “fully whole.” He doesn’t exactly explain how that would happen.

Despite saying he’s screwed up a few times, SBF has still found a few moments in this interview to smile or even chuckle at Andrew’s questions.

On reports of drug use at FTX, SBF says “there were no wild parties. At our parties we play board games. Twenty percent of people would have a quarter of a beer each and the rest of us would not drink anything.” He says he has been prescribed various things to help him concentrate. “I think they help me focus a little bit,” he says.

Worth noting that FTX’s venture capitalists have been SBF’s biggest champions up until the collapse. Sequoia Capital famously published a long magazine-type feature in which the writer speculated SBF could be the world’s first trillionaire. The firm has since taken the article off its website.

Andrew asks if venture capitalists and other investors ever asked him about the risk management issues. SBF responds, “I don’t think they bear any responsibility.” He says VCs think primarily about upsides.

SBF says he made mistakes — largely of risk management. He again seems to be making the case the issues that brought down his empire were unintentional mishaps, not intentional wrongdoing.

SBF says we “completely failed” on risk management, and conflict of interest risk. “There was no person in charge of positional risk on FTX.”

SBF: “Look, I screwed up.”

Andrew asks SBF about the adderal use and group sleepovers. SBF responds, “We messed up big.”

Sam Bankman-Fried, the founder of the now-bankrupt cryptocurrency exchange FTX, told the DealBook summit on Wednesday that the company’s downfall was caused by “a massive failure of oversight on my part.”

“Whatever happened, why it happened, I had a duty to our stakeholders, our customers, our investors, the regulators of the world, to do right by them,” he told Andrew Ross Sorkin via video from Bahamas. “Clearly, I didn’t do a good job of that. I didn’t ever try to commit fraud on anyone.”