Sam Bankman-Fried: “I never tried to commit fraud”

Sam Bankman-Fried

This is what happened during the New York Times exclusive interview with Sam Bankman-Fried about the FTX collapse.

Former FTX CEO Sam Bankman-Fried (SBF) spoke at length about the collapse and bankruptcy of FTX at the New York Times Dealbrook Summit on Wednesday.

The former billionaire defended himself against fraud allegations, claiming that FTX’s problems stemmed from an accounting error.

Sam Bankman-Fried on Alameda leverage

The Bankman-Fried interviewer began by asking the former CEO if FTX had really gone under due to an accounting error (as SBF claimed on Twitter) or if it had committed “massive fraud”.

“I never tried to defraud anyone,” he said. “I was shocked at what happened this month.”

Sorkin read SBF a letter from a former FTX client alleging that he had lost his $2 million in life savings inside the now-defunct exchange. Like many, the client suspected that FTX had lent its funds to Alameda Research, a trading desk with deep ties to FTX and Bankman-Fried.

Bankman-Fried explained that Alameda Research had more open leverage than he believed, especially using FTT tokens as collateral.

When the token plunged 90% earlier in the month, margin trading desk positions were offset in FTX Trading, with “no realistic ability for FTX to liquidate that position.” FTX’s new CEO claimed after the bankruptcy that Alameda had been exempted from the exchange’s automatic settlement engine, which applied to other companies.

When asked where FTX got the money to lend to Alameda in the first place, Bankman-Fried said it had “not knowingly mixed funds.” Rather, he pointed to numerous oversight lapses on his part regarding the size of the Alameda operation.

Did SBF commit fraud?

Despite SBF’s assertions, Sorkin did not back down: He referred to a Wall Street Journal report that Alameda CEO Carloine Elison used FTX client funds to cover margins on his company’s guarantee, and that Bankman-Fried and FTX’s head of engineering, Gary Wang, knew about it.

The claim would coincide with a Reuters report on November 15 that Wang built a “back door” into FTX that allowed Bankman-Fried to alter the company’s financial record for this purpose.

SBF did not provide a direct response to this contradiction, once again citing a discrepancy between FTX’s audited financials and Alameda’s “dashboard view” of leverage position.

He also argued that FTX and Alameda had reduced their connections since 2019, with the latter only accounting for 2% of FTX’s volume in 2022.

Despite FTX’s woes, Bankman-Fried maintained that FTX US is not insolvent, echoing comments from an interview on Tuesday when she said she had regretted filing the US arm for bankruptcy.

“As far as I know, it is totally solvent,” he said. “I think that today the withdrawals could be opened and that the whole world could recover from that,” she said.

The interview ended abruptly after Bankman-Fried was asked about the lack of a CFO at his company.