Former FTX CEO Sam Bankman-Fried spoke in a virtual interview at the New York Times’ Dealbook Summit about the collapse of his crypto empire.
From the Bahamas, Bankman-Fried told Times reporter Andrew Ross Sorkin that he didn’t “knowingly commingle funds” and that he was “surprised” by how much his hedge fund, Alameda, had borrowed to invest in positions that expected cryptocurrencies to go up.
Bankman-Fried didn’t answer if he would be criminally liable for the mishandling of customer funds. “I don’t personally think that I have...” he said, his voice trailing off. “The real answer is that it’s not what I’m focusing on.”
‘It was a much larger fraction’
Bankman-Fried admitted that he had a “limited view” of the data within Alameda because no one person was in charge of the firm’s financials.
This is the first time Bankman-Fried has spoken in a public conference since FTX folded. But it certainly isn’t the first time we’ve heard from Bankman-Fried since the collapse, since he has been very active on Twitter.
He struggled to explain differences between Alameda and, the hedge fund, and FTX, the crypto exchange.
“When I was looking at how intertwined, FTX in Alameda, I was looking at what what fraction of trading volume, what fraction of liquidity on the platform does Alameda represent,” Bankman-Fried said. “That had fallen off from something like 45% in 2019 to something like 2% this year. But in terms of positions and balances, it was a much larger fraction.”
Bankman-Fried said he knew that there was a problem on November 6, when customers started making withdrawals from the exchange.
“Alameda’s position was huge on FTX,” he said. “And we were seeing a run on the bank start which led to a $4 billion a day in withdrawals, and at that point we started calling prospective sources of financing.”
‘I didn’t think it was existential for FTX’
The saga began earlier in November with a scoop from crypto news CoinDesk showing that a large portion of Alameda Research’s balance sheet was made up of tokens that FTX had printed for trading discounts on its exchange. After a run on the exchange forced it into bankruptcy, a plethora of financial mismanagement was uncovered in its bankruptcy filing. This included everything from employees buying houses with company funds to Alameda extending a whopping $1 billion loan to Bankman-Fried.
“I didn’t think it was existential for FTX,” Bankman-Fried said about his reaction to the CoinDesk scoop. “I was thinking more of this as Alameda is going to be really tight on funds, and maybe it would have some small impact on FTX.”
“I was not nearly cautious enough from the extreme downside perspective,” Bankman-Fried said about his collateral management standards at Alameda. “I was looking at a 30% down-move over a 30-day period as an extreme down move event that we had seen before. What happened here was 95% down-move from over a year and 60% down-move in over a few day period.”
‘It was intended to be the company’s property’
Other, stranger details have also come to light since FTX’s collapse. Bankman-Fried’s roommates in the Bahamas dated each other while they ran the FTX empire, and while public data shows that Bankman-Fried was a major Democratic donor, he told YouTuber Tiffany Fong that he funneled just as much money to Republicans through dark money pools.
Sorkin asked Bankman-Fried about a 2019 tweet where the former exchange CEO had talked about taking stimulants to wake up and sleeping pills to sleep. Bankman-Fried said that the drugs he took were prescribed to him.
“There were no wild parties here,” he said. “When we had parties, we played board games.”
Bankman-Fried explained the company bought property for employees to entice Silicon Valley employees to come to the Bahamas. “I feel bad about how those investments may turn out for them,” he said.
He also did not have a clear understanding of whether or not FTX had bought his parents a vacation home.
“I don’t know the details of the house for for my parents, but I knew that it was not intended to be their long-term property,” he said. “It was intended to be the company’s property. I don’t know how that was papered in.”
Bankman-Fried claimed in the Dealbook interview that his political donations were given to candidates who would make progress on preventing future pandemics, versus trying to influence politicians to get meetings with regulators or to get a direct-clearing regulation through the Commodity Futures Trading Commission (CFTC).
Bankman-Fried also said that the focus on getting licenses for the exchange around the world was a distraction from not investing in risk management practices and conflict-of-interest compliance.
“We lost track of a really important part of the business and the product,” he said.
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