Sam Bankman-Fried: Why he doesn’t want to give away what he did in the FTX collider
Over the past year, there was a white knight showing up. FTX’s CEO Sam Bankman- Fried helped bail out some of the companies that were in trouble. Bankman- Fried, in an industry that has had its reputation marred by fraudsters, hackers and sheer greed, seemed like a nice guy. He stated that he wanted to give all of his money away.
In the weeks following the FTX implosion, Bankman-Fried has apologized for his role in the collapse, responding to accusations of fraudulent business dealings at the company. In an interview during The New York Times’ DealBook Summit last week, Bankman-Fried said he “didn’t ever try to commit fraud on anyone.”
Bankman-Fried has always tried to make as much money as possible in order to give away. His philanthropic endeavors are now in doubt.
FTX filed for bankruptcy just one month ago, as suspicions rose that it was insolvent and moving money around illegally.
Neal won’t be taking over. He is not able to serve that position because he does not have anything to do with FTX, Inc.
Blockfi and Alameda: What the past, present and future have to offer about blockchain and crypto-tecoincibility, and how to make the most of it
The negative ripple effect across the industry started last night with Blockfi, another crypto services firm, freezing customer withdrawals as a result of the FTX problems. Before recovering a bit, the price of digital currency fell to the $17,000 mark, but it is still under that level.
I was surprised to see how things spiraled out earlier this week, said SBF in the thread. I will, soon, write up a more complete post on the play by play, but I want to make sure that I get it right when I do.”
A liquidity crunch spurred by CoinDesk’s report about the arrangement, and a statement from Binance founder Changpeng Zhao saying he planned to sell his cache of FTX’s crypto token, caused a liquidity crunch exposing a reported $8 billion hole in the beleaguered company’s balance sheet.
And as if all that weren’t enough, Bankman-Fried’s successor, Ray, spent the day calling out the colossal mismanagement that took place before FTX and Alameda collapsed. In addition to calling the previous leaders “a very small group of grossly inexperienced and unsophisticated individuals” — under oath, mind you — Ray also illustrated that mismanagement by revealing that FTX used QuickBooks to run its business, which was valued at more than $30 billion at its peak. (Ray clarified: “Nothing against QuickBooks. It’s a very nice tool. It’s not for a billion-dollar company.
There was an update November 11th at 10:55AM. Added bankruptcy filing, tweets from Sam Bankman-Fried, and noted that Sir Lewis Hamilton’s F1 car will not bear FTX branding at this weekend’s upcoming race.
The failure of FTX may destroy billions of dollars in wealth and skepticism for cryptocurrencies, according to a complaint by Bankman-Fried
A large chunk of that total has vanished, they said. According to one source, it was almost certainly overstated with a missing amount of over $1 billion. The other said the gap was greater than $2 billion.
The two people who have knowledge of FTX’s finances stated that Bankman-Fried met with several executives in Nassau to calculate how much outside funding he needed to cover the shortfall.
According to the documents, there was between $1 billion and $2 billion of funds that weren’t accounted for. The sources said they don’t know what transpired to the money after it was moved.
When Bankman-Fried launched FTX, customers who wanted to send fiat currency to their FTX accounts were told to wire their money to Alameda Research. Those funds weren’t kept separate from Alameda’s money, or placed into accounts labeled “for the benefit of” FTX customers, the complaint says. The accounts that held FTX money in Alameda were labeled as “fiat@ftx”.
Federal prosecutors are investigating the collapse of FTX, an exchange that marketed itself as a beginner-friendly way to get involved in what was, until recently, a booming if highly volatile market for digital assets. High-risk trading in the United States was not allowed by FTX. The firm was located in The Bahamas.
The ultimate impact of FTX’s bankruptcy is uncertain, but its failure will likely result in the destruction of billions of dollars of wealth and even more skepticism for cryptocurrencies at a time when the industry could use a vote of confidence.
FTX’s Leader: The Rise and Fall of the Cryptoworld, and Why Cryptocurrencies Should Not Need A Savior
Editor’s Note: Emily Parker is executive director of global content at CoinDesk, a media, event, indices and data company, and a former policy advisor at the US State Department and writer/editor at The Wall Street Journal. She is the author of a book. Who My Comrades Are: Voices From the Internet Underground.” The opinions in this commentary are her own. Read more opinion at CNN.
The answer is no one, because crypto shouldn’t need a savior. The whole point of crypto is that it is supposed to be decentralized and transparent. Bankman-Fried’s rise and fall shows how far the industry has strayed from that ideal. Today’s crypto world is one of opaque entities run by larger-than-life personalities. FTX’s leader is perhaps the best example that there is.
It wasn’t supposed to be this way. Bitcoin, the world’s first major cryptocurrency, came into the world on the heels of the 2008 financial crisis, which led to a deep disappointment in bankers and politicians. The new system was supposed to be a way for you to not have to trust anyone at all. Bitcoin transactions are recorded on a decentralized ledger known as a blockchain, which everyone can see and no bad actor should be able to fraudulently alter.
On Bankman-Fried, the CEO of FTX, and Sequoia Capital: Why I Am so sorry you didn’t take it seriously
Bankman-Fried said he takes full responsibility for his mistakes. In a long Twitter thread this week, he wrote: “I was CEO, which means that I was responsible for making sure that things went well. I should have been on top of everything. I failed in that. I am sorry.
The cult of personality problem is not limited to crypto. In social media, we see it as well. Musk is the richest man on the planet and now he has control over the site.
“People feel duped,” Brian Armstrong, the CEO of rival crypto exchange Coinbase, told CNN in a phone interview on Friday. FTX was able to get a lot of attention. But as people looked into it, the fundamentals were not there.”
FTX moved users’ funds to offline wallets early Saturday morning after a wave of “unauthorized transactions” drained hundreds of millions of dollars from the beleaguered cryptocurrency exchange. FTX US didn’t confirm a hack, but Ryne Miller, the general counsel, said that the company moved funds offline or to “cold storage” to prevent outsiders from gaining access.
The US markets regulators said that Bankman-Fried had deceived investors and customers when he claimed that his building was one of the safest.
“Retail investors are the ones that suffer the most and so many people still wrongly associate bitcoin with the scammy ‘crypto’ space,” said Cory Jolppsten, CEO of Swan Bitcoins, who had raised concerns about FTX’s business model. There is a public endorsement of bitcoin by Klippsten but he still has skepticism about the other parts of the universe.
Sequoia Capital, which invested in Apple, Cisco, Google, Airbnb and YouTube, described their meeting with Bankman-Fried as likely “talking to the world’s first trillionaire.” Several of Sequoia’s partners became enthusiastic about Bankman-Fried following a Zoom meeting in 2021. The company was going to be invested in by Sequoia after several more meetings.
“I don’t know how I know, I just do. Adam Fisher, a business journalist, wrote an article about Bankman-Fried for the firm, and said that SBF is a winner. The article, published in late September, was removed from Sequoia’s website.
Bernie Madoff-like when Voyager Bankman-Fried bought up a bankrupt crypto firm, and he sold his stakes in FTX
“Not all of the investments in this early-stage asset class perform to expectations,” said the Ontario Teachers’Pension Fund in a terse statement.
When Bankman-Fried bought up the assets of bankrupt crypto firm Voyager Digital for $1.4 billion this summer, it brought a sense of relief to Voyager account holders, whose assets has been frozen since its own failure. That rescue is now in question.
As king of crypto, his influence was starting to pour into political and popular culture. FTX bought prominent sports sponsorships with Formula Racing and bought the naming rights to an arena in Miami. He pledged to donate $1 billion toward Democrats this election cycle — his actual donations were in the tens of millions — and prominent politicians like Bill Clinton were invited to speak at FTX conferences. Tom Brady was a shareholder in FTX.
“Charming regulators and investors can distract [them] from digging in and seeing what’s really going on,” Bair, who chaired the Federal Deposit Insurance Corp. from 2006 to 2011, said in a phone interview on Monday. “It felt very Bernie Madoff-like in that way.”
Bair says Bankman-Fried, like Madoff, used his connections to seducesophisticated investors and regulators into missing “red flags” hiding in plain sight.
Why did Madoff and Baryons Go Wall Street? The Case for a Transparent, Stable, Expensive, Low-Energy Investment
With FTX filing for Chapter 11 on Friday, the entire industry was thrown into chaos and raised the specter of huge losses for customers of the exchange.
Long before his Ponzi scheme collapsed, Madoff was known as a wizard on Wall Street. He managed money for the rich and famous and served on Securities and Exchange Commission advisory panels.
If your peers and marquee names in venture capital are investing, you have to do the same. It adds credibility to policymakers in Washington. Bair sits on the board of directors at Paxos, and said she was speaking for herself, not Paxos.
One of the great things that investors received was remarkably consistent returns, as well as an unlikely track record, which was eventually made possible by an elaborate scheme in which existing clients were paid new client deposits.
The good news is the former FDIC chair is not worried about the FTX implosion threatening the entire financial system the way Lehman Brothers did in 2008. The broader economy and financial market are still relatively small in scope.
About twelve hours after we learned authorities in the Bahamas have arrested FTX co-founder and former CEO Sam Bankman-Fried (SBF), the US Securities and Exchange Commission (SEC) revealed the first of multiple sets of criminal charges he’ll face.
Bankman-Fried’s alleged role in the collapse of FTX: A State of the Art and a Failure of the Traditional Banking System
The failure of both entities was caused by the misuse of client funds, which wiped out billions of dollars owed to over a million friends and family, according to the senators.
The Senate Banking Committee chair demanded that Bankman- Fried testify before his committee by the end of Thursday or he would be subpoenaed. He hasn’t agreed to testify in person at the Senate panel.
“There are still significant unanswered questions about how client funds were misappropriated, how clients were blocked from withdrawing their own money, and how you orchestrated a cover up.”
The Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency are all being asked to assess the traditional banking system’s exposure to turmoil in thecryptocurrencies.
“Crypto firms may have closer ties to the banking system than previously understood,” Warren and Smith wrote. “Banks’ relationships with crypto firms raise questions about the safety and soundness of our banking system and highlight potential loopholes that crypto firms may try to exploit to gain further access.”
“Based on your role as CEO and your media interviews over the past few weeks, it’s clear to us that the information you have thus far is sufficient for testimony,” Waters replied to Bankman-Fried earlier this week.
The Southern District of New York confirmed that he was arrested for his alleged role in the collapse of FTX.
The Royal Nassau Police Force said that Bankman-Fried was taken into custody without incident at his apartment complex after 6 pm Monday and will appear in court Tuesday.
Investigation of the SEC Findings that FTX had a Non-Circular All-Sky Traffic Inflaton in order to Imply a Criminal Investigation
If the charges are perceived to be serious enough in the other country, the US can send defendants back to America if they are sentenced to at least a year in prison.
“I didn’t knowingly commit fraud,” he told the BBC over the weekend. I didn’t want this to happen. I was less competent than I thought.
“While I am disappointed that we will not be able to hear from Mr. Bankman-Fried tomorrow, we remain committed to getting to the bottom of what happened,” Waters said in a statement Monday night.
While the probe isn’t completed, Ray said, FTX’s collapse appears to stem from the concentration of power “in the hands of a very small group of grossly inexperienced and unsophisticated individuals” who failed to implement virtually any corporate controls.
The SEC says that Alameda Research had special access to FTX funds, which it didn’t tell investors or customers about, and an ability to maintain an unlimited negative balance with FTX.
“There was no person who was chiefly in charge of positional risk of customers on FTX,” Bankman-Fried told DealBook. It feels pretty embarrassing when you think about it.
Bankman-Fried has denied knowledge of such a thing. He told Tiffany Fong in an interview that he doesn’t know how to code.
Sam Bankman-Fried, the CEO behind the collapse of FTX, as revealed by the SEC and the House Financial Services Committee
The arrest was made at the request of the U.S. government, based on a sealed indictment filed by the Southern District of New York, U.S. Attorney Damian Williams said in a tweet also on Monday night.
In a statement, the prime minister of the Bahamas stressed the country is cooperating with law enforcement and regulators in the United States, but its own “regulatory and criminal investigations into the collapse of FTX continue.”
Despite the advice of his lawyers, Bankman-Fried has given a number of interviews since the collapse, but none have been particularly illuminating. He has mostly avoided straightforward questions, been generally inattentive and played video games while in an interview.
As of late Monday night, the committee still had a notice of the hearing posted that listed Bankman-Fried as a witness and also included the written testimony of the hearing’s other witness, FTX’s CEO John Ray.
The statement states that the SEC believes that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings.
“Look, I screwed up,” Bankman-Fried said during a virtual appearance at the New York Times’ DealBook Summit. “There are things I would do anything to do over.”
The negative balance did not upset things until the prices of cripts fell, and they demanded repayment from Alameda. The SEC alleges SBF directed the firm to pay them using funds from FTX while hiding the billions of dollars Alameda now owed to FTX for its “line of credit” and continuing to withdraw hundreds of millions of dollars for himself and other executives.
SBF is alleged to have made misrepresentations to investors about FTX being a safe place to invest because an automated risk engine would sell off assets to make sure they kept up their required levels.
Other charges may follow, but these are the ones he’s facing so far, and that’s just from the SEC — its announcement notes other charges are being filed today by the US Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC).
He was expected to testify remotely today when he appeared before the House Financial Services Committee after at least two live appearances on Monday. That hearing will go forward and is scheduled to begin at 10AM ET, with testimony from FTX’s new CEO, John J. Ray III.
It was his arrest that caused jubilation, after some nail-biting over the treatment by the mainstream media, and speculation that he might be granted a free pass by US law enforcement because of his political donations.
Sam Bankman-Fried and the Commodity Futures Trading Commission: Why the CFC is a Big Financial Fraud, Is It Really Necessary?
A written preview of Ray’s testimony, published in advance of the hearing, gave the first indication that Bankman-Fried was in for a rough ride. “Never in my career have I seen such an utter failure of corporate controls at every level of an organization,” said Ray, before describing the inner circle of Bankman- Fried as “grossly inexperienced and unsophisticated.”
The US government says it was fraud from the jump. The complaint made public today by the Commodity Futures Trading Commission has some hair-raising details — and if it’s right, Sam Bankman-Fried hasn’t been telling the truth for quite some time. According to the complaint, Bankman-Fried operated Alameda Research and FTX as a common enterprise, for instance. This complaint is civil.
In a press conference today, US attorney Damian Williams characterized Alameda Research and FTX as “one of the biggest financial frauds in American history.”
The CFTC has a pretty strong argument suggesting that this is not accurate, as Ellison previously stated that her and Bankman- Fried keep the two companies separate.
Both teams shared office spaces, as well as key personnel, technology and hardware, intellectual property, and other resources.
He took over the company four weeks ago and testified before the Financial Services Committee on Tuesday. When a congressman asked Ray how his experience with FTX compares with Enron, Ray was quick to make the distinction clear:
Bankman-Fried’s Indictment in the First Four Months of the F(T) X-ray Bankruptcy
If Bankman-Fried is convicted on all eight counts, he’ll face a maximum sentence of 115 years in prison.
There’s still a ton we don’t know about the case. But the fact that prosecutors put together an eight-count, 14-page indictment just four weeks after FTX filed for bankruptcy suggests prosecutors may have an ace in the hole, and/or a preponderance of evidence against the company. The SdeNY are not sloppy and do not have a solid case to indict them.
Several attorneys not involved in the case have told me that Bankman- Fried’s arrest signals that FTX employees might be helping prosecutors.
“The smart move by former employees would be to rush to become a cooperator in exchange for more lenient treatment, and it would not be surprising to learn that one or more of them had done so,” said Howard A. Fischer, a former SEC lawyer. He added: “The fact that only one person has been charged so far would seem to indicate this as well.”