Sam Bankman-Fried, the celebrated crypto entrepreneur whose empire is now facing bankruptcy, said Wednesday in his first public appearance since stepping down as FTX chief executive that he did not “try to commit fraud against anyone.”
Bankman-Fried, who appeared at the New York Times DealBook summit, insisted on an interview with CNBC host Andrew Ross Sorkin during a video call in which he was “shocked” by the collapse of his company.
“I was excited about FTX a month ago…I was shocked at what happened,” Bankman-Fried said, adding: “I substantially underestimated what the scale of the market crash and the speed of it could be like.”
Bankman-Fried and his former company are being investigated by a growing number of regulators, and the fallout from the FTX collapse is only widening.
The company’s new chief executive, John Ray III, said in the bankruptcy filing that in his 40-year career, he had never seen “such a complete failure of corporate controls and such a complete absence of reliable financial information.” Ray is expected to testify before the House Financial Services Committee on December 13.
The broader industry fallout continues as well, with cryptocurrency firm BlockFi filing for bankruptcy last week. And on Wednesday one of the largest crypto exchanges in the world, Kraken, Announced it was laying off 1,100 workers, nearly a third of its staff.
Several other speakers at the event also nodded to the consequences.
BlackRock CEO Larry Fink acknowledged that his company had invested $24 million in FTX and predicted that many cryptocurrency companies would not be around much longer.
Bankman-Fried, 30, was flying high in the months before his cryptocurrency exchange abruptly imploded. FTX signed a licensing agreement with one of the major sports arenas in the US and ran a star-studded Super Bowl ad last winter. And as the market became increasingly volatile, driving investors out of the market and forcing major industry players out of business, he assumed the role of the industry’s “white knight” and brought insolvent companies into his portfolio. expanding empire.
But the vast empire of the king of cryptocurrency collapsed when cryptocurrency trading publication CoinDesk published an article raising concerns about the solvency of the Bankman-Fried businesses on November 2.
At the center of the report was a leaked balance sheet from FTX’s sister company, Alameda Research, showing that the company’s financial backing consisted primarily of FTX’s FTT token, a digital asset that, like many cryptocurrencies, is prone to price fluctuations.
Days after the CoinDesk report, FTX rival Binance announced that it would sell its FTX holdings, triggering a run-on-style rush of withdrawals. Just over a week later, FTX filed for Chapter 11 bankruptcy protection after it failed to raise the emergency capital needed to return user funds and continue operating.
Bankman-Fried said on Wednesday that FTX had been a profitable growing business, but added that it lacked the bandwidth to run two companies at once.
“I didn’t have the attention for it, and I was nervous about a conflict of interest between the two,” he said of FTX and Alameda.
“When you go back to 2019, FTX and Alameda were very connected in a number of ways,” he told the DealBook audience.
FTX, which ran a more efficient operation than many of its competitors, did not hire 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 subsidiary was fully solvent and “could open today.”
It then reiterated previous promises to focus on its customers.
“Look, I’ve had a bad month. This hasn’t been any fun for me, but that’s not what matters here. It’s the millions of customers that matter. What matters here is FTX stakeholders,” Bankman said. -Fried. He did not elaborate on how the company would restore the lost funds to its clients and investors.
On the first day of the bankruptcy hearings, FTX lawyers painted a picture of the gross mismanagement and lack of oversight at Bankman-Fried that precipitated the company’s rapid collapse.
“They have witnessed probably one of the most abrupt and difficult collapses in the history of corporate America,” an attorney for FTX, James Bromley, told the hearing.
Bankman-Fried and his associates greenlighted lavish spending, including $300 million for real estate purchases in the Bahamas for FTX and Alameda employees, according to documents filed by current FTX attorneys.
U.S. authorities, including the Securities and Exchange Commission and the Cyber Crime Unit The US Attorney’s Office for Southern New York, as well as Bahamian regulators, are investigating the collapse.
Even before FTX went under, the industry faced a post-Covid downturn and a series of smaller companies collapsed over the spring and summer. On Wednesday, Bitcoin was trading at around $17,000, about a quarter of its peak value in the fall of 2021.