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FTX chief Sam Bankman-Fried says he ‘screwed up’ but rejects fraud claim

03 Dec 2022 By theguardian

FTX chief Sam Bankman-Fried says he ‘screwed up’ but rejects fraud claim

"Look, I screwed up," the fallen crypto billionaire Sam Bankman-Fried told a conference in New York on Wednesday, but he maintained he "didn't ever try to commit fraud" and was "shocked" by the collapse of his businesses.

With glassy eyes, at times visibly shaking, Bankman-Fried appeared via video conference from a nondescript room in the Bahamas. He told the New York Times DealBook summit he was "deeply sorry about what happened" but consistently said he did not have a full picture of what was going on within the various branches of FTX, his now bankrupt cryptocurrency exchange, and its offshoots.

Bankman-Fried resigned as head of the FTX cryptocurrency exchange when it declared bankruptcy earlier this month. The true fallout of the collapse is still emerging. FTX owes $3.1bn (£2.57bn) to its largest creditors, assets have disappeared, law enforcement and regulators are circling and Bankman-Fried's free-handed largesse to the US political elite is set to cause a firestorm in Washington.

In another interview, broadcast on Thursday morning, Bankman-Fried told ABC: "I wasn't spending any time or effort trying to manage risk on FTX." He "stopped working as hard for a bit" before the firm's implosion, he said.

One key question about the collapse is whether FTX's customers' funds were misappropriated and given to FTX's hedge fund Alameda Research. Questioned by New York Times columnist Andrew Ross Sorkin, the 30-year-old appeared to shift blame to Alameda.

"I didn't knowingly commingle funds," he said. "I was frankly surprised by how big Alameda's position was."

Asked if he had behaved like a bank teller who took the cash from the till home in the evening, Bankman-Fried said: "Look, I wasn't running Alameda, and I didn't know exactly what was going on, and the size of their position."

Alameda's chief executive, Caroline Ellison, had reportedly been in a relationship with Bankman-Fried.

"Look, I've had a bad month. This is not great," he told the audience, to laughter. "What matters here is all the customers and stakeholders that got hurt and to help them out. What happens to me is not the important part."

In earlier interviews at the conference, some of finance's biggest players weighed in on the scandal. Larry Fink, chief executive of BlackRock, the world's largest asset manager, said it appeared FTX's collapse was the result of not just mismanagement but bad behavior. Fink hinted that his firm, which had $24m (£20m) invested in FTX, may have been given misleading information.

"Right now, we can make all the judgment calls that it looks like there was some misbehavior of major consequence," he told the conference. "Could we have been misled? Until we have more facts, I will not speculate."

The treasury secretary, Janet Yellen, said the FTX collapse was a "Lehman moment" for the crypto industry and described cryptocurrencies as "very risky assets".

Bankman-Fried was interviewed by ABC's George Stephanopoulos at his home in the Bahamas this week. In the interview, the former chief executive was asked about his risk management at FTX.

"I think that there is something maybe even deeper wrong there, which was I wasn't even trying, like, I wasn't spending any time or effort trying to manage risk on FTX," Bankman-Fried said.

"If I had been spending an hour a day thinking about risk management on FTX I don't think that would have happened. I think I stopped working as hard for a bit, and honestly, if I look back on myself, I think I got a little cocky - I mean, more than a little bit - and I think part of me like felt like we'd made it."

Asked if he was worried about going to jail, Bankman-Friend said: "There are a lot of things that are worrying me right now. As best as possible, I'm trying to focus on what I can do, going forward, to be helpful, and, you know, let whatever regulatory and legal processes are happening play out as they will."

His appearance at the DealBook summit came after he gave a series of discursive and sometimes nonsensical explanations for the circumstances of FTX's collapse, including blaming "poor internal labeling" of accounts for the company's $8bn (£6bn) shortfall in assets.

Last week, Bankman-Fried was dropped by the leading US law firm Paul, Weiss after lawyers for FTX claimed he was disrupting its bankruptcy reorganization efforts through "incessant and disruptive tweeting".

On stage, he acknowledged his lawyers "were very much not" suggesting it was a good idea to be speaking at the conference.

Bankman-Fried, whose personal fortune was estimated at $26bn (£21bn) at its peak, said he had about $100,000 (£83,000) to his name. Asked if he had been truthful in the interview, he said: "I was as truthful as I'm knowledgeable to be."

The US Senate agriculture committee has scheduled a hearing for Thursday on "Lessons Learned from the FTX Collapse" with commodity futures trading commission chair Rostin Behnam scheduled to appear as a witness.

That will be followed, on 16 December, by hearings by the House financial services committee. It has said it expects Bankman-Fried to appear.

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