February 6, 2023

Sam Bankman Fried responds to fraud charges: ‘I did not steal the money’

Sam Bankman Friedthe cryptocurrency executive, on Thursday gave his first detailed response to Criminal charges against him Last month, he argued that millions of customers on his crashing exchange, FTX, could still get their money back.

In a statement published on substack, Mr Bankman-Fried said that “a very significant recovery is likely still to come”.

He wrote, “I didn’t steal money, and I certainly didn’t hide billions.” “Almost all of my assets were and still are usable to support FTX clients.”

His statement came a day after attorneys overseeing FTX’s bankruptcy announced to court that they had recovered at least $5 billion in funds. Mr. Bankman-Fried cited this ad in an effort to bolster his case that FTX clients can still make them “pretty much complete.” It was not clear if he had checked his testimony with his legal team before it was published.

FTX filed for bankruptcy in November after a run on client deposits revealed an $8 billion hole in its accounts. Mr. Bankman Fried, 30, was at the time He was arrested last month at his home in the Bahamas, where FTX was based, and quickly delivered to the United States. Federal prosecutors in Manhattan charged him with fraud, money laundering, and campaign finance violations.

Authorities allege that Mr. Bankman-Fried stole billions of dollars in customer deposits from FTX and used the funds to buy luxury real estate, invest in other companies, make political contributions and fund cryptocurrency trading at Alameda Research, the hedge fund he also owns.

He was the founder of FTX It was issued last month with a $250 million bond Under strict conditions that required him to remain confined to his parents’ home in Palo Alto, California. In a brief court appearance in New York last week, He pleaded not guilty on criminal charges.

A spokesman for Damian Williams, the US Attorney for the Southern District of New York, who is prosecuting Bankman-Fried, declined to comment.

A spokesman for Mr Bankman Fried and his legal team declined to comment.

Mr Bankman-Fried’s statement on Thursday repeats a narrative he has put forward before – and which US prosecutors, regulators and industry experts have strongly rejected. The publication laid out a detailed timeline of the financial condition of Alameda, which was closely associated with FTX, arguing that the company had lost money as a result of a market crash for which it was not prepared.

Bankman-Fred’s statement also blamed FTX’s failure in part on an attack by its biggest competitor, Binance.

He wrote, “You didn’t steal money.”

But even as he outlined Alameda’s finances, Mr. Bankman-Fried also emphasized that he had not run the company “for the past few years” and had no access to all of its financial information. Regulators and prosecutors argued that he was in fact closely involved with Alameda’s management and orchestrated a system allowing the company to borrow an unlimited amount of money from FTX’s pool of customer deposits.

His statement did not address the guilty pleas of two former senior executives, Caroline Ellison and Gary Wang, and both are cooperating with the plaintiffs. Mrs. Ellison, who dated Mr. Bankman Fried, was the president of Alameda when the company collapsed, and Mr. Wang founded FTX with Mr. Bankman Fried.

On Wednesday, a bankruptcy attorney for FTX told a federal judge that the exchange had recovered more than $5 billion in cash and crypto assets — far more than the company previously said it had on hand. The announcement raised hopes that FTX might be able to return some funds to millions of creditors and customers around the world.

Sullivan and Cromwell’s attorney, Andrew Dittderich, told the judge who oversaw FTX’s bankruptcy in Delaware that the legal team had identified more than nine million customer accounts on the cryptocurrency exchange.

In an email after the bankruptcy hearing, Mr. Dietderich said that of the $5 billion in newly recovered assets, approximately $1.7 billion was in cash.

He said the newly recovered assets do not include nearly $20 million in cash and $484 million in stock in online trading firm Robinhood that federal prosecutors seized from a separate company Mr. Fred Bankman set up in Antigua. He also said that FTX’s new management believes Robinhood shares and forfeited funds should be distributed to FTX’s creditors.

FTX is also looking into whether it can sell about $4.6 billion in investments the company has made in other businesses, mostly crypto companies.

In his statement Thursday, Bankman-Fred said he had previously offered to “contribute virtually all of my personal equity to Robinhood for clients” if FTX agreed to help him pay his legal bills. He recently filed in bankruptcy court claiming that these shares were his personal property and that he needed to sell some to pay his attorneys.

Mr. Bankman-Fried also blames Sullivan and Cromwell, who did legal work for FTX before the stock market crashed, with pressure on him to bankrupt the company and allow restructuring attorneys, John Jay Ray IIItook him.

In his statement, Mr. Bankman-Fried included excerpts from what appeared to be FTX’s financial statements and balance sheets. Mr. Ray, in bankruptcy court filing, attacked Previous management of FTX He said there was a “complete failure of company control” and the company’s financial statements should not be trusted.

Moira Pinza, a former federal prosecutor now in private practice, said Mr Bankman-Fred’s position was a gift to prosecutors and certainly a headache for his legal team.

“The strongest evidence a prosecutor can have is the defendant’s statement, and Bankman-Fried is giving the government a gift,” said Ms. Penza. “If I was prosecuting the case, I would want him to keep talking, and if I was defending him, I would tell him to shut his mouth.”

After the FTX collapse, Bankman-Fried gave a series of interviews about the implosion. But since being released on bail last month, he’s been relatively quiet, except for A.J A few tweets, So far. He has had a handful of visitors at his parents’ home, including author Michael Lewis who is writing a book about him. Encrypted YouTube Personality Tiffany Fung; and a Reporter Puck Online Publishing.

In office, Bankman-Fried said he had hoped to respond in detail to the allegations against him much earlier, starting with testimony he planned to give to the House Financial Services Committee on December 13.

“Unfortunately, the Department of Justice moved to arrest me the night before, precipitating my testimony with a very different news cycle,” he wrote, referring to the Department of Justice.