Former FTX Trading CEO Sam Bankman-Fried: "I've had a bad month"
Former FTX CEO Sam Bankman-Fried realized his company was heading for trouble late Nov. 6. That's the day he understood that Alameda Research, the trading arm of FTX, had too many assets tied up in the FTX platform and soon wouldn't be able to cover an increasing rate of customer withdrawals.
"We're seeing a run on the bank start, and that was leading to $4 billion a day of client withdrawals," he told the New York Times at a Dealbook event Wednesday. "At that point, we started calling prospective sources of financing because I was nervous about what was going to happen there."
Binance, the world's largest crypto platform, was supposed to swoop in and save the day, but that never happened. Instead, Bankman-Fried resigned from FTX Trading on Nov. 11, the same day it filed for Chapter 11 bankruptcy protection. The 30-year-old is also being investigated in the U.S. and abroad for possible securities violations.
The audience sat quietly as Bankman-Fried, speaking via video from his home in the Bahamas, stumbled through the causes of FTX's meltdown. The onetime crypto wunderkind said Alameda was humming along this year until the crypto market crash tanked the value of the assets it held. Ultimately, the financial health of Alameda was too closely tied to FTX and Bankman-Fried didn't realize that until it was too late, he claimed.
"I wasn't running Alameda and I didn't know exactly what was going on," he said. "I didn't know the size of their position. A lot of these are things I've learned over the last month as I was frantically digging into this on November 6, November 7, November 8. Obviously, that's a pretty big oversight that I wasn't more aware."
Late at night on November 6, he said, "I start to become nervous that FTX is not going to be able to fulfill customer withdrawals." In that moment, it dawned on him that "things might end quite badly here," he recounted.
"Will we be able to make sure all customers are whole?" he said.
Even today, Bankman-Fried maintains that the FTX's U.S. division has enough cash on hand for customer withdrawals. But even if that were true, American customers cannot access their funds. FTX assets are now locked in "cold storage" in South Dakota, stored on hard drives not connected to the internet, and will remain there while the company goes through bankruptcy.
Securities regulators in the Bahamas have seized some of FTX's assets and said they're planning to use them to refund customers.
Bankman-Fried shrugged off questions about whether there was a larger scheme to defraud customers and investors. "I've had a bad month," he said.
"I did not ever try to commit fraud on anyone," he said.
Speaking against lawyers' advice
The ex-CEO has been unusually vocal since his company's meltdown. Bankman-Fried said Wednesday that his lawyers would rather he stay quiet, but "that's not who I am and not who I want to be."
"I think I have a duty to talk to people," he said. "I have a duty to explain what happened and I think I have a duty to do whatever I can to try and do what's right, if there is anything I can do and try and help customers out here. I don't see what good is accomplished by me just sitting locked in a room pretending the outside world doesn't exist."
He told Vox recently that his previous backing of crypto regulations was "just PR" and revealed this week to Axios that his bank account was "down to $100,000."
"I have one working credit card left, I think there might be $100,000, something like that, in one bank account," Bankman-Fried said during the Dealbook event. "Everything I had, even all the loans I had, those were things I was reinvesting in the business."
The FTX bankruptcy has captivated the crypto and finance worlds. Days after the bankruptcy filing, court documents revealed the company owed at least $3.1 billion to its top 50 creditors.
"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," new FTX CEO John Ray III — who previously oversaw the bankruptcy of Enron — said in court documents filed earlier this month. Alvarez & Marsal, the accounting firm FTX hired to help it through bankruptcy said the company "historically did not keep reliable books and records."
The meltdown has renewed calls from Washington to regulate the crypto industry. Democratic Sen. Sherrod Brown of Ohio urged U.S. Treasury Secretary Janet Yellen this week to develop crypto protection legislation because of what happened with FTX.
"As the bankruptcy filings show, FTX failed to exercise basic corporate controls or risk management over its operations," Brown, chairman of the Senate banking committee, wrote in a letter to Yellen on Wednesday. "In addition, FTX relied on its own proprietary crypto token, leading to inflated valuations that further fueled irresponsible risk-taking."
Icarus-like fall
Where Bankman-Fried stands now is a long way from his former glory as the founder of a crypto powerhouse.
Bankman-Fried was born in California to two Stanford University professors. He graduated from the Massachusetts Institute of Technology with a physics degree and later moved to Hong Kong to start Alameda, to start Alameda, which later become FTX's trading arm.
After his short stint in Hong Kong, Bankman-Fried moved to the Bahamas, where he founded FTX in 2019, just as cryptocurrencies were starting to gain widespread popularity.
After buying a wide array of tokens a few years ago, Bankman-Fried saw his personal wealth balloon. At one point, Bankman-Fried's personal wealth grew to $26.5 billion, according to Forbes. He became a big political donor, including spending $40 million mainly on Democratic candidates and progressive causes, according to the Wall Street Journal.
Widely known as a vegan who loves playing the video game League of Legends, Bankman-Fried has loaned hundreds of millions of dollars to struggling crypto companies, earning him the moniker of "crypto savior" before FTX's collapse.