Sam Bankman-Fried admitted to Congress Tuesday that he “f–ed up” while running bankrupt cryptocurrency exchange FTX, and claimed he has only $100,000 in his bank account, despite a one-time net worth of $26 billion.
Or, at least—that’s what he had planned to do before he was arrested late Monday in the Bahamas on U.S. federal charges that include wire fraud, securities fraud, and money laundering. Bankman-Fried (nicknamed SBF) was due to testify under oath before the House Financial Services Committee on Tuesday.
A copy of his prepared remarks show that he continued to maintain that he did not know FTX’s investment arm, Alameda, used customer funds for risky investments—and he bitterly criticized the managers who took over the company and forced him out after it began to unravel. He also addressed personal questions—including denying reports of hard-partying at FTX headquarters and acknowledging that he has been “sad” for most of his adult life.
Here’s what he planned to tell lawmakers in his 18-pages of prepared testimony.
‘I f—ed up’
Bankman-Fried planned to open his remarks with a lengthy mea culpa: “I would like to start by formally stating, under oath: I f—ed up,” he wrote.
The Securities and Exchange Commission (SEC) alleged in a civil complaint that the 30-year-old FTX founder had “orchestrated a years-long fraud” that concealed from investors the diversion of customer funds from FTX to his privately held crypto research hedge fund Alameda Research, among other allegations. The agency said that FTX had raised more than $1.8 billion from equity investors, including $1.1 billion from those based in the U.S., while promoting the cryptocurrency asset trading platform as safe.
“A large number of things had to go wrong for this to happen,” Bankman-Fried wrote. “Because I was not running Alameda, I was not aware of some of the critical events at the time. But I was running FTX, and that means it was ultimately my responsibility to do right by FTX’s customers.”
New FTX chief executive John Ray isn’t speaking to him
Much of the testimony is aimed at the current FTX leadership, including the company’s new court-appointed CEO John Ray, law firm Sullivan & Cromwell, and other longtime executives. He claimed they pushed the company into Chapter 11 bankruptcy protection, a decision he now claims was a mistake.
“I have sent five emails to Mr. Ray. Mr. Ray has never responded, nor has he reached out to me to communicate in any other ways,” Bankman-Fried wrote. He claimed he wanted to talk about a range of issues, including potential financing options as well as how to get access to his personal data, such as his LinkedIn password.
Ray, who is best known for serving as CEO of Enron during its bankruptcy and for recovering more than $828 million for creditors, was brought on board to oversee FTX’s restructuring after Bankman-Fried’s departure in early November. During his own congressional testimony on Tuesday, Ray was asked what role Bankman-Fried will play in the company going forward. “The role he’s currently playing,” Ray responded. “Zero.”
Read more: A Crypto Reckoning Isn’t Coming Yet
He added that FTX employees did invoicing and expenses over Slack and used QuickBooks, a consumer-level tax software, to handle its accounting while Bankman-Fried ran the company. “Nothing against QuickBooks. Very nice tool,” Ray said on Tuesday. “It’s not for a multibillion dollar company.”
“I’ve done probably a dozen large-scale bankruptcies over my career,” he added. “This one is unusual, and it’s unusual in the sense that literally there’s no recordkeeping whatsoever.”
SBF suggests ulterior motives in bankruptcy filing
Bankman-Fried wrote that he has 19 pages of screenshots showing how he was pressured to quickly file for Chapter 11 bankruptcy by FTX U.S. General Counsel Ryne Miller and the law firm Sullivan & Cromwell. “They range from adamant to mentally unbalanced,” he claimed. “They also called many of my friends, coworkers, and family members, pressuring them to pressure me to file, some of whom were emotionally damaged by the pressure. Some of them came to me, crying.”
He suggested in his remarks that the pressure he faced may have been the result of Sullivan & Cromwell standing to reap substantial fees from FTX’s bankruptcy, as law firms typically do in bankruptcy cases. “In the Enron bankruptcy, law firms including Sullivan and Cromwell were paid roughly $700m (!!!) in fees from funds that would otherwise have gone to creditors.”
Lawyers for investors in Enron were awarded $688 million in legal fees in 2008 for recovering a $7.2 billion settlement fund for shareholders.
FTX lacked a risk management team
Although FTX grew to become the second-largest cryptocurrency exchange in the world, Bankman-Fried planned to tell Congress how internal failures led the company to unravel last month. His draft testimony claimed that FTX did not have a risk management team to help him assess where customer funds went despite the many risks of diverting customer money to pay expenses and debts at Alameda Research. “While FTX International had a team dedicated to financials, and to many other areas of the business, it did not have a team dedicated to risk management, or to user position monitoring.”
Bankman-Fried also blamed various failures on FTX’s internal controls, including the company’s dashboard for not displaying Alameda’s full position size, which he claimed he used to assess risk. He claims that Alameda’s position was over twice as large as what was displayed to him.
“I, as CEO, did not put adequate effort into monitoring risk on FTX,” he planned to tell Congressional leaders. Bankman-Fried told The New York Times on Nov. 30 that he “didn’t knowingly commingle funds.”
In his written testimony, Bankman-Fried added that FTX was the victim of a sudden market collapse due to “tightening policy, a war, and supply chain problems” that led Alameda Research to lose 90% of its assets this year and become insolvent.
SBF denied allegations of ‘hard-partying culture at FTX’
Bankman-Fried denied media reports about having wild parties with drugs and alcohol while he was the CEO of FTX. He wrote that he didn’t have his first drink until he was 21, and has never been drunk.
“Our ‘parties’ were mostly dinner and board games,” he wrote.
Bankman-Fried planned to end his testimony by opening up about his use of an Emsam patch, which boosts dopamine production and is often used to treat patients with Parkinson’s disease or depression. Some opponents have questioned whether he used the patch to get high. “I use it, daily, for its only on-label use as an antidepressant,” he wrote, adding that he’s had a prescription for roughly a decade. “The last few months have been difficult enough for everyone that it feels unremarkable to me, in comparison, that I need to put on the official Congressional Record that I am, and for most of my adult life have been, sad.”
SBF denied having billions of dollars stashed away personally
Although he admitted to taking loans out of Alameda in his own name, Bankman-Fried wrote that those loans “were not generally used for personal consumption or savings; most were used to invest in the business.” He claimed that all he has left in his bank account is $100,000.
However, that doesn’t necessarily account for all of Bankman-Fried’s assets. FTX and people associated with the company reportedly bought $300 million in Bahamas property during the crypto exchange’s boom.
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