Sam Bankman-Fried maintains his “I’m innocent” stance while his colleagues accept their guilt regarding FTX Cryptocurrency crashing down.
It is as the disgraced founder and former CEO of the collapsed cryptocurrency exchange FTX goes to the internet from his parent’s $4 million home in Stanford, California. Publishing his thoughts on the FTX Cryptocurrency issue.
In a blog post by Substack on Thursday, January 12, Bankman-Fried presented his most in-depth personal analysis of FTX’s “pre-mortem summary.”
“I did not steal money, nor did I hide billions of dollars,” Bankman-Fried stated. He is facing eight criminal allegations from the U.S. Department of Justice (DOJ). His scheduled court date is October 3.
This new piece is about FTX International’s insolvency, not FTX US, which, according to Bankman-Fried, “has always been entirely solvent.”
Bankman-Fried wrote: “When I turned over FTX US to [John J. Ray III] and the Chapter 11 team, it had about [more than $350 million] in net cash on hand beyond customer accounts.” Its money and clients were kept separate from those of FTX International.
Ray, the newly appointed CEO in charge of FTX’s restructuring, said to a Delaware bankruptcy judge that he had little faith in any of the company’s financial statements.
While the Substack article represented a break from Bankman-other Fried’s preferred channel, Twitter. It reaffirmed and elaborated on crucial allegations the founder made during his pre-arrest media tour.
Many Bankman-arguments Fried’s contradict federal prosecutors’ accusations and former FTX officials’ guilty pleas.
A Crypto Code Loaded with “Could Haves”
The lengthy essay restated three primary claims and may provide insight into the failed founder’s forthcoming legal defense.
Bankman-Fried can still make consumers whole and should have been allowed to continue running the firm. He did not run Alameda and hadn’t for years. The implosion was not his fault because external circumstances and Binance are primarily responsible.
Bankman-Fried did not use the public post to address the allegations. Regarding how and why FTX customer funds were commingled and traded by Alameda Research. Or how and why they were allegedly used to purchase hundreds of millions of dollars worth of a real estate. And making tens of millions in political donations to both U.S. political parties.
“I believe that, had FTX been given a few weeks. It could have utilized its liquified assets and equity to raise enough financing. Making customers substantially whole,” he wrote.
It is unclear how raising external capital to make customers fill the gaps left by the alleged fraudulent misappropriation of their funds would work. Or how Bankman-declarations Fried’s represent a significant strategic departure from the borrow-money-to-plug-holes strategy that doomed FTX in the first place.
Still, supporting Bankman-Fried’s claims of the FTX enterprise’s possible solvency, at least in some tiny manner, is that more than $5 billion in cash and liquid assets have been located among FTX’s holdings.
Observers in the industry hypothesize that Bankman-most Fried’s recent blog post is an attempt to capitalize on this news.
The creator also used the blog post to further aim at his one-time law firm, Sullivan & Cromwell (S&C), and competitor exchange Binance.
In the two months since FTX’s bankruptcy, Binance has had difficulties in the cryptocurrency market.
“In November 2022, Alameda became bankrupt due to a dramatic, targeted slump triggered by the CEO of Binance… Then followed [Binance CEO Changpeng Zhao’s] tragic post, following an extraordinarily effective PR effort against FTX over several months — and the crash… Then, Alameda’s virus extended to FTX…,” stated Bankman-Fried.
Bankman-Fried argued that FTX’s law firm behaved rashly and in their self-interest by forcing the company into bankruptcy in response to Binance’s “attack.”
“S&C and the GC were the principal parties strong-arming and frightening me into selecting the candidate they chose as CEO of FTX — including for a solvent entity in FTX US — who then filed for Chapter 11 and chose S&C as counsel to the debtor entities,” he said. “…Since S&C pressured FTX into Chapter 11 petitions, I fear that these avenues have been closed off.”
Bankman-Fried also cherry-picked underperforming companies from other industries, such as Tesla and Facebook, to attribute bad performance to macro market reasons.
As for the Alameda Research connection?
“I haven’t run Alameda for the previous few years,” Bankman-Fried wrote, adding that “Much of the relevant data … is for a firm (Alameda) I wasn’t running at the time.”
Alameda CEO Caroline Ellison is collaborating with federal authorities in their investigation into Bankman-Fried and FTX, has acknowledged fraud, and has shown remorse for her acts.
“I have much more to say,” Bankman-Fried said, “about why Alameda failed to hedge, what transpired with FTX US, what led to the Chapter 11 procedure, S&C, and more.” But at least this is the beginning.
Unlike previous declarations in which he confessed oversight errors and management failings, the phrasing in Bankman-Thursday Fried’s blog post demonstrated little personal responsibility for FTX’s failures. It remains to be seen whether that mentality will bleed into his legal strategy and, above all, whether it will help him avoid jail time.