Former FTX CEO Sam Bankman-Fried says he’s ‘not trying to cheat’

Sam Bankman-Fried, a once-famous crypto entrepreneur whose empire is now facing bankruptcy, said he was “not trying to scam anyone” when he appeared public for the first time since stepping down as CEO of FTX on Wednesday.

At the New York Times DealBook Summit, Bankman-Fried said in a video interview with CNBC host Andrew Ross Sorkin that he was “shocked” by his firm’s collapse.

“I was excited by FTX a month ago. … I was shocked by what happened,” said Bankman-Fried. “I greatly underestimated the scale and speed of the market crash.”

A growing number of regulators are investigating Bankman-Fried and his former company, and the consequences of FTX’s collapse are only widening.

The company’s new CEO, John Ray III, said in bankruptcy filings that in his 40-year career he had never seen “corporate controls fail so completely and reliable financial information so completely destroyed.” Ray is expected to testify before the House Financial Services Committee on December 13.

Broader industry results continue to take hold, with crypto firm BlockFi filing for bankruptcy last week. And on Wednesday, Kraken, one of the world’s largest crypto exchanges, announced it was laying off 1,100 workers, roughly a third of its staff.

A few other speakers at the event also nodded for the fallout.

BlackRock CEO Larry Fink acknowledged that his company has invested $24 million in FTX and predicted that many crypto companies will not be around for much longer.

Bankman-Fried, 30, was flying high in the months before the crypto exchange suddenly exploded. FTX signed a licensing deal with a major US sports arena and ran a star-studded Super Bowl commercial last winter. And as the market became more and more volatile, alienating investors and forcing major industry players to shut down their operations, he became the industry’s “white knight”, incorporating bankrupt firms into his sprawling empire.

But the crypto king’s vast empire fell apart when crypto trading publication CoinDesk published an article on Nov. 2 outlining concerns about the solvency of Bankman-Fried’s businesses.

At the center of the report was a leaked balance sheet from Alameda Research, FTX’s sister company, which showed that the firm’s financial backing consisted mainly of FTX’s self-issued FTT token – a digital asset prone to price fluctuations like many cryptocurrencies.

Days after the CoinDesk report, FTX rival Binance announced that it would sell FTX holdings, sparking an influx of bank-led withdrawals. A little over a week later, FTX filed for Chapter 11 bankruptcy protection after failing to raise the necessary emergency capital to return users’ funds and continue working.

Bankman-Fried added on Wednesday that FTX is a profitable growing business but lacks the bandwidth to run two companies at once.

“I hadn’t noticed and was nervous about the conflict of interest between the two,” he said of FTX and Alameda.

“Back in 2019, FTX and Alameda were very connected in many ways,” he told the DealBook audience.

Running a leaner operation than most of its competitors, FTX failed to employ an in-house accountant, and its books were never audited in its three years in business.

Bankman-Fried continued to insist that FTX’s US branch was fully solvency and could “open today”.

It continued to reiterate its past commitments to focus on its customers.

“Look, I’ve had a bad month. It hasn’t been fun for me at all, but that’s not the point here. It’s the millions of customers that matter. It’s the stakeholders at FTX that matter,” said Bankman-Fried. He did not elaborate on how the company would restore the lost funds to its customers and investors.

On the first day of bankruptcy hearings, FTX’s lawyers painted a picture of the massive mismanagement and lack of oversight that caused the Bankman-Fried-led company to quickly disintegrate.

“You’ve probably witnessed one of the most sudden and difficult crashes in the history of corporate America,” said James Bromley, an attorney for FTX, at the hearing.

According to filings of current FTX attorneys, Bankman-Fried and his associates greenlighted generous expenses, including $300 million, for FTX and Alameda employees to purchase real estate in the Bahamas.

U.S. officials, including the Securities and Exchange Commission and the Southern New York U.S. Attorney’s Cybercrime Division, and regulators in the Bahamas are investigating the collapse.

Even before FTX sank, the industry faced a post-Covid crisis, with a number of smaller companies going bankrupt in the spring and summer. On Wednesday, Bitcoin was trading at around $17,000, roughly a quarter of its fall 2021 peak.

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