Sam Bankman-Fried, the once-celebrated crypto entrepreneur whose empire now faces bankruptcy, said Wednesday at his first public appearance since he stepped down as CEO of FTX that he did not “try to commit fraud on anyone.”
Bankman-Fried, appearing at the New York Times DealBook Summit, insisted in an interview with CNBC anchor Andrew Ross Sorkin over a video call that he was “shocked” by his firm’s collapse.
“I was excited about FTX a month ago. … I was shocked by what happened,” Bankman-Fried said, adding, “I substantially underestimated what the scale of the market crash could look like and the speed of it.”
A growing number of regulators are investigating Bankman-Fried and his former company, and the fallout from the collapse of FTX is only expanding.
The company’s new CEO, John Ray III, said in bankruptcy filings that in his 40-year career, he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information.” Ray is expected to testify before the House Financial Services Committee on Dec. 13.
The broader industry consequences also continue to play out, with the crypto firm BlockFi filing for bankruptcy last week. And on Wednesday one of the world’s largest crypto exchanges, 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 fallout.
BlackRock CEO Larry Fink acknowledged that his company had invested $24 million in FTX and predicted that many crypto companies would not be around for much longer.
Bankman-Fried, 30, was flying high in the months before his crypto exchange abruptly imploded. FTX signed a licensing deal with a major U.S. sports arena 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 to shutter their operations, he took on the mantle of the industry’s “white knight,” folding insolvent firms into his sprawling empire.
But the crypto king’s vast empire came tumbling down when the crypto trade publication CoinDesk published an article raising concerns about the solvency of Bankman-Fried’s businesses on Nov. 2.
At the heart of the report was a leaked balance sheet from FTX’s sister company, Alameda Research, which showed the firm’s financial backing consisted primarily of FTX’s self-minted FTT token — a digital asset that, like many cryptocurrencies, is prone to price fluctuations.
Days after the CoinDesk report, FTX rival Binance announced it would sell its FTX holdings, setting off a bank-run-style rush of withdrawals. Just over a week later, FTX filed for Chapter 11 bankruptcy protection after it failed to raise emergency capital necessary to return users’ funds and keep operating.
Bankman-Fried said Wednesday that FTX had been a profitable growing business but added that he 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 leaner operation than many of its competitors, 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 U.S. subsidiary was fully solvent and “could be opened today.”
He went on to reiterate past pledges to focus on his customers.
“Look, I’ve had a bad month. This has not been any fun for me, but that’s not what matters here. What matters is the millions of customers. What matters here are the stakeholders in FTX,” Bankman-Fried said. He did not elaborate on how the company would restore lost funds to its clients and investors.
On the first day of the bankruptcy hearings, FTX’s attorneys painted a picture of the gross mismanagement and lack of oversight under Bankman-Fried that precipitated the firm’s rapid unraveling.
“You have witnessed probably one of the most abrupt and difficult collapses in the history of corporate America,” an attorney for FTX, James Bromley, said at the hearing.
Bankman-Fried and his associates greenlighted lavish expenditures, including $300 million for real estate purchases in the Bahamas for FTX and Alameda employees, according to filings from current FTX attorneys.
Authorities in the U.S., including the Securities and Exchange Commission and the Cyber Crimes Unit of the U.S. attorney’s office for Southern New York, as well as regulators in the Bahamas, are investigating the collapse.
Even before FTX went under, the industry faced a post-Covid downturn and a series of smaller company collapsed during the spring and summer. On Wednesday, Bitcoin was trading at about $17,000, roughly a quarter of its peak value in fall 2021.