Comment on this story
comment
Fallen crypto founder Sam Bankman-Fried launched a newsletter on a popular platform on Thursday offering a lengthy defense of his actions.
“I didn’t steal any funds, and I certainly didn’t hide billions,” Bankman-Fried said of how he ran FTX, his now-bankrupt cryptocurrency firm, which has been accused of misusing millions of customers’ funds.
It was his biggest public defense since the Justice Department filed eight counts of fraud, money laundering and other charges against Bankman-Fried last month and the Securities and Exchange Commission and Commodity Futures Trading Commission filed related civil suits. Together they portrayed the manager as using client funds at FTX to fund his own risky investments, personal purchases and campaign contributions.
Bankman-Fried pleaded not guilty to the charges brought by the US Department of Justice from the Southern District of New York. He is currently under house arrest at his parents’ home in Palo Alto, California, and is scheduled to appear in court on those charges later this year.
Bankman-Fried did not respond to a message asking for comment, nor did his attorney Mark Cohen. A spokesman for the Southern District of New York declined to comment.
Bankman-Fried’s comments came Thursday via a post on a new account on Substack, the newsletter platform he created. The letter offered further details to back up feelings the 30-year-old former CEO expressed in a spate of media interviews before his arrest in December, while also denying he had knowingly done anything unethical or illegal.
Bankman-Fried wrote Thursday that FTX’s post-bankruptcy financial position is less dire than the company’s many legal and government critics have claimed.
For example, “FTX US is fully solvent and always has been,” he wrote of the company’s American division and said so was “ridiculous that FTX US users haven’t gotten healthy yet and got their money back.”
But while lawyers for the restructured FTX said in bankruptcy court on Wednesday that they recovered about $5 billion to repay creditors, they say the process is not easy.
John J. Ray, the veteran bankruptcy trustee brought in to clean up FTX, said it will take months to track down the swarm of accounts and subsidiaries amid a plethora of incomplete bookkeeping. And according to the investigators, up to 8 billion US dollars cannot be explained.
Bankman-Fried says he was careless on FTX. The public prosecutor speaks of fraud
With dozens of customers waiting for money they didn’t have access to, Bankman-Fried simply portrayed the losses as a matter of market ebb and flow, not some crime.
“No funds were stolen. Alameda lost money due to a market crash for which it was not adequately insured,” he wrote, detailing that company’s investment strategy and route to bankruptcy.
Although Alameda was a company he co-founded and run by people he was close to, Bankman-Fried attempted to portray FTX as a discreet victim of Alameda’s troubles, much like a variety of independent crypto companies have been affected by a broader contagion in the market.
“FTX was affected [by the Alameda challenges] like Voyager and others before it,” he wrote, referring to the crypto asset manager that went under last summer due to the decline in the value of another crypto company, Terraform Labs.
But the SEC called Bankman-Fried “the ultimate decision-maker” at Alameda in its complaint. It has also been alleged that he made “undisclosed venture investments, lavish real estate purchases and large political donations” with customer deposits to FTX’s sister company, painting a picture of a company that was far from a helpless bystander in Alameda’s woes.
To aid their case, prosecutors have the help of former Bankman-Fried associates Caroline Ellison and Gary Wang, both of whom have pleaded guilty and are cooperating with the government.
Bankman-Fried gave a series of interviews following the bankruptcy, including a lengthy session with ABC’s George Stephanopoulos. He has that too continued to tweet since he was indicted by SDNY prosecutors a month ago.
The narrative was consistent throughout: He he says has little knowledge, let alone control, of Alameda funds. And he would try to help people get their money back.
Thursday’s letter continued this theme. “I dedicate almost all of my private wealth to clients,” he wrote, without explaining how it would work or what it would mean.
But he also offered more financial details than previous statements. Bankman-Fried focused on how Alameda became insolvent, mostly choosing to ignore the thrust of the allegations against him – that he illegally used FTX clients’ money to prop up the hedge fund.
Bankman-Fried wrote in the Substack post that he attempted to set the record straight with a testimony he was scheduled to make before the House Financial Services Committee on Dec. 13. “Unfortunately, the night before, the DOJ attempted to arrest me to preempt my testimony with a very different news cycle,” he wrote of his arrest in the Bahamas, where he lived at the time and where FTX was based.
While Bankman-Fried tried to portray himself as a helpful figure Thursday, Ray said the chaos was caused by the executive himself.
“Never in my career have I seen such a complete failure of corporate controls and such a complete lack of trustworthy financial information,” he said last month of how FTX and Alameda were run under Bankman-Fried.
Legal experts have repeatedly said that the crypto executive’s press statements are a bad idea and provide fodder for prosecutors to recreate timelines and use comments against him.
It was unclear if the substack was launched as an ongoing newsletter or as a one-off update, but Bankman-Fried concluded his post by saying readers could expect it more of his writings.
“I have much more to say,” he wrote. “But at least that’s a start.”