The former CEO of cryptocurrency exchange FTX, Sam Bankman Fried (SBF), has defied the advice of his lawyers and given an interview in which he admitted “I made a lot of mistakes” that led to the collapse of his company and left investors with little prospect of recovering billions of dollars.
Speaking at the New York Times’ DealBook Summit, SBF said he believes FTX’s US operations were solvent and investors could be made whole. But the company’s overseas operations, he opined, dragged the company down.
SBF took responsibility for the collapse, admitting that those overseas outposts took risky positions that crashed FTX.
He admitted to “massive failure of oversight of risk management and of … responsibility from myself running FTX.”
I’ve had a bad month. This has not been fun for me
But he denied driving, or knowing of, a strategy to comingle funds between FTX and Alameda Research – a company also largely owned by SBF that was FTX’s biggest user and a huge holder of FTX’s FTT token.
The obvious conflict of interest and potential for mutually beneficial collusion between FTX and Alameda worried observers – correctly, as it turned out. FTX loaned billions of customers’ funds to Alameda. Once that transaction became known, it was apparent that FTX customers’ assets were beyond their reach, and FTX’s. FTX collapsed because it was then not in a position to return customers’ funds.
SBF said that set of circumstances “points to another failure of oversight on my part … failure to appoint someone to be chiefly in charge of that … but I wasn’t trying to co-mingle funds.”
It just happened on his watch anyway.
SBF said he sensed that FTX was in trouble and its Alameda entanglements were to blame, and tried to recover FTX’s liquidity.
During the hour-plus interview, SBF defended his extensive political donations as support for candidates he felt supported policies that could head off future pandemics – not attempts to create an easier regulatory environment for FTX.
He tried to explain real estate investments in the Bahamas as a recruiting tool to lure talent from Silicon Valley.
Asked if investors in FTX bear responsibility for the company’s collapse, SBF disagreed that they should have conducted greater oversight. The nature of venture capital, he said, is to look for a big exit and not to ponder all the ways an investment could fail.
SBF appeared contrite during the interview, saying “Look, I’ve had a bad month. This has not been fun for me but that’s not what matters here.”
“What matters here is the millions of customers. What matters here is all the stakeholders in FTX who got hurt, and trying to do everything I can to help them out.”
But during the interview it was apparent that SBF did too little to help them out by doing his job as CEO, and now has little power to do anything that will help.
While he has made efforts to understand the cause of FTX’s collapse, he said “Over the last month I have limited access to data.” His analysis is therefore a mixture of memory and informed guesswork.
But the verdict on what he left behind is already damning: John Ray III, the newly-appointed CEO of FTX who gets to clean up the mess, has rated the company’s affairs as worse than anything he has previously seen.
And Ray was the man who oversaw the dissolution of Enron – the energy trading firm that has for 20 years been the benchmark for corporate malfeasance and recklessness. ®