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Tuesday, June 6, 2023

‘I’ve Had a Bad Month’: Sam Bankman-Fried Ignores Lawyers to Make Awkward Public Appearance

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Even as critics fumed that he wasn’t already in jail, and rumors swirled that he would cancel the risky public appearance, Sam Bankman-Fried, co-founder of the failed cryptocurrency exchange FTX, gave a live video interview to cap off the New York Times‘ DealBook Summit conference on Wednesday.

Speaking from the Bahamas, where FTX is headquartered, Bankman-Fried told Times financial columnist Andrew Ross Sorkin, “I did not ever try to commit fraud on anyone.”

The Securities and Exchange Commission, the Commodity Futures Trading Commission and the U.S. Department of Justice are all currently investigating how FTX, once the third-largest crypto exchange in the world and valued at $32 billion, unraveled in a matter of days in early November.

Binance, a rival exchange that moved to save it through an acquisition, then backed out of the deal, saying FTX’s problems were “beyond our control or ability to help.”

Amid the chaos, Bankman-Fried was forced to resign as chief executive and allowed the company to file for bankruptcy, but only after days of desperately clinging to power despite company leaders urging him to step down.

“I made a lot of mistakes, there are things I would give anything to be able to do over again,” Bankman-Fried told Sorkin in their hour-long conversation, during which he drank a pamplemousse LaCroix, tapped his foot and often kept his eyes cast downward. Another one of his conclusions: “I’ve had a bad month.”

At one point, Sorkin, pushing him on the irresponsibility of FTX management, quipped: “It sounds like a bunch of kids on Adderall having a sleepover party.”

“We messed up big,” Bankman-Fried replied. He denied, however, that the FTX team in the Bahamas had an out-of-control drug culture. “

At our parties, we played board games,” he said. “I didn’t see any illegal drug use.” He did say he’s been prescribed medications that help him with focus and concentration.

The smoldering ruins of FTX are now being overseen by CEO John J. Ray III, a corporate turnaround specialist who famously handled the aftermath of the Enron accounting scandal in 2001.

In FTX’s bankruptcy filing, he wrote : “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

Investors were wiped out, there’s an unexplained $8 billion shortfall on the balance sheet, and the exchange still owes its top 50 creditors $3.1 billion.

Many hold Bankman-Fried personally responsible for the crisis, and there remain significant questions about whether FTX and Alameda Research — a sister trading firm that he also co-founded — misused customer funds.

In the first half of the interview, Sorkin pressed on the connection between FTX and Alameda, with Bankman-Fried repeatedly arguing that he had little idea of what was going on at the latter business.

“I was nervous, because of the conflict of interest, of being too involved,” he said. “I didn’t have the bandwidth to run two companies at once.” At issue are the massive loans of customer money that FTX made to Alameda to cover the firm’s mounting losses, which — as with almost every bad decision that has come to light — Bankman-Fried framed as a mistake rather than deliberate wrongdoing. “I didn’t knowingly co-mingle funds,” he said.

On the question of charges, or staying out of the U.S. for fear of arrest, Bankman-Fried said he believed he could travel freely and has considered it. “I don’t personally think that I have [criminal liability],” he noted, though he claimed “that’s not what I’m focusing on,” because “what matters here is all the customers.”

He speculated that he could eventually be answering questions in a Congressional hearing. Billionaire Mark Cuban recently told TMZ that if he were in the younger man’s shoes, he’d “be afraid of going to jail for a long time.”

Bankman-Fried now claims to have just $100,000 in the bank, and told Sorkin he is down to one working credit card. Some cypto observers believe he has far greater sums stashed away. “I don’t have any hidden funds here,” he insisted.

Sorkin did early on read an angry letter from a man who claimed to have lost his life savings in FTX — around $2 million — but for the most part, Bankman-Fried was largely able to talk about the exchange imploding due to a failure of risk management, continually expressing surprise at the speed and scale of the crash.

Several times, he simply claimed not to have access to relevant information or details.

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