Sam Bankman-Fried Denies Knowing Scale of Bad Alameda Bets
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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

By ALEXANDER SAEEDY
Fri, Dec 2, 2022 8:55amGrey Clock 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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The Knight Frank Luxury Investment Index reveals investments of passion are paying strong dividends, in some areas at least

By Bronwyn Allen
Tue, Apr 9, 2024 4 min

Art was the investment of passion that gained the most in value in 2023, according to Knight Frank’s Luxury Investment Index (KFLII). This is the second consecutive year that art has risen the most among the 10 popular investments tracked by the index, up 11 percent in 2023 and 29 percent in 2022. Art was followed by 8 percent growth in jewellery, 5 percent growth in watches, 4 percent growth in coins and 2 percent growth in coloured diamonds last year.

The weakest performers were rare whisky bottles, which lost nine percent of their value, classic cars down six percent and designer handbags down four percent. Luxury collectables are typically held by ultra-high-net-worth individuals (UHNWIs) who have a net worth of US$30 million or more. Knight Frank research shows 20 percent of UHNWI investment asset portfolios are allocated to collectables.

In 2023, the KFLII fell for only the second time, with prices down 1 percent on average.

Despite record-breaking individual sales in 2023, a surge in financial market returns contributed to a shift in allocations impacting on luxury asset value,” the report said. “… our assessment reveals a need for an ever more discerning approach from investors, with significant volatility by sub-market.

Sebastian Duthy of AMR said the 2023 art auction year began with notable sales including a record price for a Bronzino piece. But confidence waned as the year went on.

“It was telling that in May, Sotheby’s inserted one of its top Old Master lots – a Rubens’ portrait – into a 20th Century Modern evening sale. But by then, it was clear that the confidence among sellers, set by the previous year’s record-busting figures, was ebbing away. In the same month, modern and contemporary works from the collection of the late financier Gerald Fineberg sold well below pre-auction estimates.”

The value of ultra contemporary or red-chip’ art contracted the most in 2023.

“Works by a growing group of artists born after 1980 have been heavily promoted by mega galleries and auction houses in recent years. With freshly painted works in excess of £100,000 almost doubling in 2022, it was little surprise that this sector was one of the biggest casualties last year. There is a risk there are now simply too many fresh paint artists with none really standing out.”

In the jewellery market, Mr Duthy noted that demand was strongest for coloured gemstones of exceptional quality, iconic signed period jewels, single-owner collections, and items with historic provenance in 2023. In the watches market, Mr Duthy said collectors chased the most iconic and rare timepieces.

A Rolex John Player Special broke the model record when it sold for £2 million at Sotheby’s in May, double the price for a similar example sold at Phillips in 2021,” he said.

Although whisky was the worst-performing collectable in 2023, it has delivered the highest return on investment among the 10 items tracked by the index over the past decade, up 280 percent. Andy Simpson of Simpson Reserved, said 2023 was a challenging year but the best of the best bottles gained 20 percent in value. In my opinion some bottles that lost significant value in 2023 will return through the next two years as they are simply so scarce and, right now at least, so undervalued, Mr Simpson said.

Whisky was the worst performing collectable in 2023 but it had highest return on investment over a 10-year period. Image: Shutterstock

Classic car expert Dietrich Hatlapa said the 6 percent fall in collectable vehicle values in 2023 followed a 22 percent surge in 2022. The strong performance of other investment classes such as equities may have dampened collectors’ appetites it’s a very small market so it only takes a minor change in portfolio allocations to have an effect, and there has also probably been a degree of profit taking. However, we have seen some marques like BMW (up 9 percent in value) and Lamborghini (up 18 percent), which appeal to a younger breed of collector, buck the trend in 2023.”

Mr Duthy said a dip in the share price of the top luxury handbag brands last Autumn appeared to spook investors. Last autumn it was possible to pick up an Hermès white Niloticus Himalaya Birkin in good condition for under £50,000. The recent slide reflects a general correction at the upper end that’s been underway for some time rather than changing attitudes to the harvesting of exotic skins.

According to Knight Frank’s Attitudes Survey, the top five investments of passion among Australian UHNWIs are classic cars, art and wine. Fine wine values gained just 1 percent in 2023 as the market continued its correction, said Nick Martin of Wine Owners. “It’s been a hell of a long run, so I’m not that surprised. Some wines from very small producers that had enjoyed the most exuberant growth have seen the biggest drops. It had got a bit silly, £50 bottles had shot up to £200 or £300.”

Favourite investments of passion: Australia vs Global

1. Classic cars (61 percent of Australian UHNWIs vs 38 percent of global UHNWIs)
2. Art (58 percent vs 48 percent)
3. Wine (48 percent vs 35 percent)
4. Watches (42 percent vs 42 percent)
5. Jewellery (18 percent vs 28 percent)

Best returns among investments of passion (10 years)

1. Whisky 280 percent
2. Wine 146 percent
3. Watches 138 percent
4. Art 105 percent
5. Cars 82 percent

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