January 30, 2023

Sam Bankman Fried speaks for the first time since his arrest


New York
CNN

Sam Bankman-Fried, the alleged former crypto star turned White collar criminalHe spoke for the first time since his arrest last month, and published at length blog post which appears to have put his defense against fraud charges.

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Bankman Fried is under house arrest at his parents’ home in Palo Alto, California, pending trial. He pleaded not guilty to multiple federal charges of fraud and conspiracy related to the collapse of his crypto empire.

In what he calls an “ante-mortem overview” of the FTX crash, Bankman-Fried reiterates allegations he made in November after the cryptocurrency exchange filed for bankruptcy and before his arrest.

Among the main topics:

  • He places the blame squarely on Alamedathe cryptocurrency hedge fund he founded in 2017. “Alameda failed to adequately hedge against severe market crash risks: hundreds of billions of assets had only a few billion dollars of hedges,” he says.
  • He was not in charge at Alameda. Bankman-Fried reiterates that he has not been in charge of Alameda in the “past few years,” having named his ex-girlfriend, Caroline Ellison, as sole CEO in 2022.
  • Alameda and FTX’s problems were not uniquewrites Bankman Fried. He often contextualizes a corporate decline as part of the industry-wide downturn that has hit many others, including Three Arrows Capital, Voyager, and Celsius — all of which went bankrupt in the so-called crypto winter, a massive drop in the value of digital assets, albeit Like a bear market.
  • Then the Alameda infection spread to FTX “Because Alameda had an open margin position on FTX; and a bank run turned illiquidity into bankruptcy.”
  • FTX has been pressured into filing for Chapter 11 by the law firm Sullivan & Cromwell, he says. “If FTX had been given a few weeks to gather the necessary liquidity, I think they would have been able to get customers pretty much complete,” he writes. “I didn’t realize at the time that Sullivan and Cromwell… would potentially doom these efforts.” Representatives for Sullivan & Cromwell did not immediately respond to a request for comment.

Some of Bankman-Fried’s claims directly contradict allegations by US prosecutors that FTX clients’ funds are being siphoned off to plug holes in Alameda in violation of FTX’s terms of service.

Key witnesses for the prosecution, including the former CEO of Alameda and co-founder of FTX, plead guilty Bankman-Fried was implicated in embezzlement of customer funds.

Separately on Thursday, seven news organizations asked the judge in the Bankman-Fried criminal case to release the names of two people who co-signed his $250 million bond.

“The public interest in this matter cannot be overstated,” lawyers representing the news outlets wrote in a letter to the court.

Four people, including Bankman Fried’s parents, co-signed the bond, which would require payment only if he did not appear in court or otherwise contravened the conditions set by the judge.

Bankman-Fried’s attorney sought to keep the two non-parent signing identities sealed, arguing that their safety could be at risk.

News organizations including the Wall Street Journal, Washington Post and Associated Press said the argument was “entirely speculative” adding that Bankman Fried failed to provide any compelling reasons for keeping the names anonymous.

“The public … has an interest in knowing who provided Mr Bankman-Fried with financial support after this massive alleged fraud and political scandal, especially given Mr Bankman-Fried’s close relationships with financial industry leaders and high-profile investors,” the letter states. Silicon and elected representatives”.

On Wednesday, The New York Times submitted its own letter asking the judge not to change the names from the bonds. Inner City Press also submitted a separate letter.

Judge Bankman-Fried has given until January 19 to respond to the requests.

— CNN’s Cara Scannell contributed to reporting.