Sam Bankman-Fried Denies Knowing Scale of Bad Alameda Bets
FTX’s co-founder says he made mistakes during his tenure at the helm of the cryptocurrency exchange but didn’t ever try to commit fraud
3 min
Sam Bankman-Fried said that he didn’t intend to commit any fraud or use customer funds to back leveraged bets that went wrong at Alameda Research, a cryptocurrency hedge fund attached to FTX that pushed the exchange to bankruptcy.
Mr. Bankman-Fried, speaking at the New York Times DealBook Summit in New York, denied knowingly commingling customer funds to back his crypto trading operation and tried to deflect some of the blame for FTX’s collapse away from himself, saying he was surprised at the size of Alameda’s bets that went wrong.
“I didn’t know exactly what was going on,” Mr. Bankman-Fried said via livestream from the Bahamas. “I learned a lot of these things as they were going on.”
The comments came at Mr. Bankman-Fried’s first known public appearance since he resigned from FTX and the firm collapsed into the largest-ever bankruptcy by a cryptocurrency platform.
FTX, long a chaotic mess despite its public image of stability, failed after dipping into customer funds to back billions of dollars in risky bets by Alameda, its affiliated trading firm. New managers hired to steer the firm through bankruptcy are only beginning to sift through FTX’s liabilities and hunt down assets that left it before it failed. The firm was plagued by an unprecedented lack of corporate controls, according to its new management, and cryptocurrencies deposited by millions of customers are still frozen on the exchange, with little indication of how much they will get back or when.
Appearing in a black T-shirt and drinking a LaCroix sparkling water during a roughly hourlong interview, Mr. Bankman-Fried repeatedly apologised for the collapse of FTX and acknowledged “core management failures” that led to a distraction from the basic business of ensuring that the exchange could protect customers’ money and had sufficient liquidity to meet withdrawals.
He also spoke about an extensive lobbying campaign in Washington designed to advance the firm’s interests, which has drawn scrutiny amid the firm’s collapse.
“There are things I felt like we needed to do for the business; there were things that were crucial for us to be able…to get regulated and get bank accounts,” Mr. Bankman-Fried said.
Responding to a question about whether FTX and Alameda were more closely connected than previously understood, Mr. Bankman-Fried said Wednesday that they were “tied together more than I would have ever wanted it to be.”
Mr. Bankman-Fried, however, maintained that he didn’t knowingly commingle FTX client funds. He said he started to get concerned late on Nov. 6 of problems with Alameda’s position on FTX and later that day started to get concerned that “things might end quite badly here.”
“Alameda’s position was big on FTX,” Mr. Bankman-Fried said.
Mr. Bankman-Fried had faced a rebellion from some Alameda employees years earlier in part over what they viewed as his cavalier approach to risk, The Wall Street Journal reported Wednesday. Since the firm’s collapse, he has maintained his residence in the Bahamas, where he relocated FTX in 2021, and is cooperating with local authorities over the wind-down of its operations in the country, according to court papers.
“Right now, I’m looking to be helpful anywhere I can with any of the global entities that want my help,” Mr. Bankman-Fried said on Wednesday about his cooperation with regulators over the collapse of FTX.
Customers of largely unregulated crypto platforms lack the safety nets such as deposit insurance that kick in when traditional banks and brokerages go under. The task of cleaning up after FTX and other recent crypto failures has largely fallen to U.S. bankruptcy courts, which have only begun to answer how crypto customers should fare in an insolvency.
Prosecutors in New York and the U.S. Securities and Exchange Commission are examining the firm’s collapse. The alleged misuse of customer funds has exposed Mr. Bankman-Fried, who also founded and owns Alameda, to potential criminal liability, according to experts in white-collar criminal law.
Mr. Bankman-Fried said Wednesday he believed most U.S. exchange customers should be able to recover their locked-up crypto but that FTX’s international customers may not be able to.
“I’m confused why FTX US isn’t processing withdrawals right now,” he said, adding that he believed it should be able to return all assets belonging to American customers.
Representatives for FTX’s new management didn’t immediately respond to a request for comment Wednesday. John J. Ray III, FTX’s new chief executive, has criticised Mr. Bankman-Fried for making “erratic and misleading” statements since he stepped away from the firm.
FTX suffered a “complete failure of corporate controls” according to Mr. Ray, who said in a bankruptcy-court filing that in his 40 years in the business of restructuring companies, including Enron, he has never seen anything as bad as FTX.
At FTX’s first appearance in bankruptcy court last week, lawyers for the company’s new management said Mr. Bankman-Fried ran FTX like a personal fiefdom that had little to no corporate governance or record-keeping.
Mr. Ray has also said that Mr. Bankman-Fried and his associates had used company money to buy themselves homes in the Bahamas and that management still can’t locate a substantial amount of FTX’s assets.
Mr. Bankman-Fried said his lawyers advised against him speaking in public on Wednesday, but he said he wanted to try to explain what went wrong at FTX.
“I have a duty to talk to people and to explain what happened,” he said. “I don’t see what good is accomplished by me being locked in a room pretending the outside world doesn’t exist.”
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Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
New research tackles the source of financial conflict and what we can do about it
3 min
When couples argue over money, the real source of the conflict usually isn’t on their bank statement.
Financial disagreements tend to be stand-ins for deeper issues in our relationships, researchers and couples counsellors said, since the way we use money is a reflection of our values, character and beliefs. Persistent fights over spending and saving often doom romantic partnerships: Even if you fix the money problem, the underlying issues remain.
To understand what the fights are really about, new research from social scientists at Carleton University in Ottawa began with a unique data set: more than 1,000 posts culled from a relationship forum on the social-media platform Reddit. Money was a major thread in the posts, which largely broke down into complaints about one-sided decision-making, uneven contributions, a lack of shared values and perceived unfairness or irresponsibility.
By analysing and categorising the candid messages, then interviewing hundreds of couples, the researchers said they have isolated some of the recurring patterns behind financial conflicts.
The research found that when partners disagree about mundane expenses, such as grocery bills and shop receipts, they tend to have better relationships. Fights about fair contributions to household finances and perceived financial irresponsibility are particularly detrimental, however.
While there is no cure-all to resolve the disputes, the antidote in many cases is to talk about money more, not less, said Johanna Peetz, a professor of psychology at Carleton who co-authored the study.
“You should discuss finances more in relationships, because then small things won’t escalate into bigger problems,” she said.
A partner might insist on taking a vacation the other can’t afford. Another married couple might want to separate their previously combined finances. Couples might also realize they no longer share values they originally brought to the relationship.
Recognise patterns
Differentiating between your own viewpoint on the money fight from that of your partner is no easy feat, said Thomas Faupl, a marriage and family psychotherapist in San Francisco. Where one person sees an easily solvable problem—overspending on groceries—the other might see an irrevocable rift in the relationship.
Faupl, who specialises in helping couples work through financial difficulties, said many partners succeed in finding common ground that can keep them connected amid heated discussions. Identifying recurring themes in the most frequent conflicts also helps.
“There is something very visceral about money, and for a lot of people, it has to do with security and power,” he said. “There’s permutations on the theme, and that could be around responsibility, it could be around control, it could be around power, it could be around fairness.”
Barbara Krenzer and John Stone first began their relationship more than three decades ago. Early on in their conversations, the Syracuse, N.Y.-based couple opened up about what they both felt to be most important in life: spending quality time with family and investing in lifelong memories.
“We didn’t buy into the big lifestyle,” Krenzer said. “Time is so important and we both valued that.”
For Krenzer and Stone, committing to that shared value meant making sacrifices. Krenzer, a physician, reduced her work hours while raising their three children. Stone trained as an attorney, but once Krenzer went back to full-time work, he looked for a job that let him spend the mornings with the children.
“Compromise: That’s a word they don’t say enough with marriage,” Krenzer said. “You have to get beyond the love and say, ‘Do I want to compromise for them and find that middle ground?’”
Money talks
Talking about numbers behind a behaviour can help bring a couple out of a fight and back to earth, Faupl said. One partner might rue the other’s tightfistedness, but a discussion of the numbers reveals the supposed tightwad is diligently saving money for the couple’s shared future.
“I get under the hood with people so we can get black-and-white numbers on the table,” he said. “Are these conversations accurate, or are they somehow emotionally based?”
Couples might follow tenets of good financial management and build wealth together, but conflict is bound to arise if one partner feels the other isn’t honouring that shared commitment, Faupl said.
“If your partner helps with your savings goals, then that feels instrumental to your own goals, and that is a powerful drive for feeling close to the partner and valuing that relationship,” he said.
A sense of mission
When it comes to sticking out the hard times, “sharing values is important, even more so than sharing personality traits,” Peetz said. In her own research, Peetz found that romantic partners who disagreed about shared values could one day split up as a result.
“That is the crux of the conflict often: They each have a different definition,” she said of themes such as fairness and responsibility.
And sometimes, it is worth it to really dig into the potentially difficult conversations around big money decisions. When things are working well, coming together to achieve these common goals—such as saving for your own retirement or preparing for your children’s financial future—will create intimacy, not money strife.
“That is a powerful drive for feeling close to the partner and valuing that relationship,” she said.
Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
