(Bloomberg) — Sam Bankman-Fried offered one of the most detailed descriptions of the FTX debacle as he prepares to fight fraud charges, blaming falling markets and a rival attack for the bankruptcy of his exchange.
“I did not steal funds, and I certainly did not hide billions,” the former crypto tycoon wrote in a blog post Thursday. “Unfortunately I have been slow to respond to public misperceptions and material misstatements.”
The latest version of events, based on what Bankman-Fried recalls of the balance sheets of FTX and its sister company Alameda Research, does not address the accounting problems he had previously cited as one reason for his empire’s demise in November. Nor is it referring to allegations that it allowed Alameda to divert funds from FTX clients for high-risk operations.
Bankman-Fried, 30, is out on bail and is wearing an electronic bracelet while living at her parents’ home in California. He faces trial in October after pleading not guilty to fraud and campaign finance charges. Bankman-Fried has previously mentioned many of the points in the latest account of him.
Prosecutors accuse him of being behind one of the biggest scams in US history, after fraudulently collecting US$1.8 billion from investors under the pretext that FTX had adequate controls and risk management. He is also charged with embezzling client funds at FTX to cover personal expenses, real estate purchases and operations in the now-collapsed Alameda.
Bankman-Fried complained again that it lost access to much of its data after the bankruptcy of the FTX group. He said that in recent years he has not directed Alameda.
According to Bankman-Fried calculations, Alameda had $100 billion of net asset value in 2021. But it said it was not sufficiently protected against the “risk of an extreme market crash” before the deep drop that occurred in the US. digital assets in 2022. It finally crashed when a rival’s “targeted attack” sparked a run, ultimately bringing down FTX, he said.
“Fateful tweet”
On Nov. 6, Changpeng “CZ” Zhao, CEO of Binance Holdings Ltd., the largest cryptocurrency exchange, tweeted about the sale of a large chunk of FTX’s native FTT token. That exacerbated concerns about the Bankman-Fried business and FTX quickly fell apart.
“Then came CZ’s fateful tweet, following an extremely effective months-long PR campaign against FTX, and bankruptcy,” Bankman-Fried wrote on the blog.
He added that “Alameda lost liquidity, and so did FTX International, because Alameda had an open margin position in FTX; and the bank run turned that lack of liquidity into insolvency.”
Zhao has previously said that he did not realize the tweet would “cause so many changes.”
‘misleading’ statements
Former Alameda CEO Carolina Ellison has pleaded guilty to fraud charges and is cooperating with prosecutors. In her guilty plea last month, Ellison said she and Bankman-Fried knowingly misled lenders about the amount Alameda was borrowing from the cryptocurrency exchange. She also stated that they both prepared false financial statements.
In the blog post, Bankman-Fried reiterated claims that FTX’s US operation was solvent and could, over time, have made the international division’s clients “substantially complete” after securing interest. of the investors.
Restructuring expert John J. Ray III took over as CEO of FTX when the company filed for bankruptcy. He has painted a picture of FTX as a mismanaged company largely out of control, mired in conflict and lacking in basic accounting practices, calling it a the worst failure of corporate controls I have ever seen.
Original Note: Bankman-Fried Says He ‘Didn’t Stash Billions’ as He Denies Theft
—In collaboration with David Scheer.
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