“I didn’t steal funds, and I certainly didn’t stash billions away,” the disgraced cryptocurrency boss Sam Bankman-Fried claimed on Thursday in his first detailed response to the criminal charges filed against him last month.
In a statement titled FTX Pre-Mortem Overview and published on Substack, Bankman-Fried said that millions of customers of FTX, his bankrupt exchange, could get their money back and that “very substantial recovery remains potentially available”.
Bankman-Fried has pleaded not guilty to criminal charges that he defrauded investors and is currently on bail at his parents’ home in California on $250m bail.
“No funds were stolen,” Bankman-Fried claims in the post, offering a timeline of the exchange’s collapse that blames market crashes and FTX’s biggest rival, Binance, for the implosion.
US authorities have a different view. Damian Williams, the US attorney for the southern district of New York, which is prosecuting Bankman-Fried, has called the collapse “one of the biggest financial frauds in American history”.
According to Williams and other US authorities Bankman-Fried and his colleagues siphoned off billions of dollars in customer funds from FTX to spend on luxury properties, other investments, political contributions and to prop up Alameda, a hedge fund also set up by Bankman-Fried.
In the post Bankman-Fried argues Alameda lost money because it was unprepared for the collapse in the cryptocurrency markets and rising interest rates. “And so Alameda’s assets get hit, again and again and again,” he wrote. “Alameda’s contagion spread to FTX and other places.”
FTX’s woes were compounded by a “fateful tweet” by Binance’s chief executive, Changpeng “CZ” Zhao, that initiated a run of FTX’s FTT token. Bankman-Fried paints the move as a “targeted attack on assets held by Alameda” that followed “an extremely effective months-long PR campaign against FTX”.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
Given a few more weeks, Bankman-Fried claims, the companies could have weathered the storm. But, he argues, FTX was pushed into an unnecessary bankruptcy by law firm Sullivan & Cromwell.
Bankman-Fried has said Sullivan & Cromwell advised him to appoint veteran bankruptcy specialist John Ray III to be the new CEO of FTX. Ray has argued that FTX collapsed because of an “unprecedented and complete failure of corporate controls”.
Last November James Bromley, co-head of the restructuring practice at law firm Sullivan & Cromwell, claimed a “substantial amount” of FTX Group’s assets “have either been stolen or are missing” during a court hearing.
Two of Bankman-Fried’s most senior colleagues, FTX co-founder Zixiao “Gary” Wang and former Alameda CEO Caroline Ellison, have pleaded guilty to fraud charges and are cooperating with the authorities. Bankman-Fried does not mention them in the post.
Bankman-Fried writes that he had hoped to give his side of the story at a congressional hearing that was scheduled for 13 December.
“Unfortunately, the DoJ [Department of Justice] moved to arrest me the night before, pre-empting my testimony with an entirely different news cycle,” he wrote.
This article was amended on 12 January 2023 to clarify that Bankman-Fried said Sullivan & Cromwell advised him to appoint John Ray III to be the new CEO of FTX.
