Bankman-Fried ‘Substantially Underestimated’ Size, Speed of FTX Collapse
The FTX co-founder said he was “frankly surprised” by how entangled his market maker had become with his exchange — the impetus of the blowup
FTX founder Sam Bankman-Fried | Blockworks exclusive art by Axel Rangel
In a highly anticipated and wide-ranging interview, FTX founder Sam Bankman-Fried claimed he was both unaware of and not intentionally committing fraud — and largely dismissed his prospects for criminal or civil prosecution.
“I didn’t knowingly commingle funds,” Bankman-Fried said. “I wasn’t trying to commingle funds,” he added moments later.
Bankman-Fried appeared virtually from an undisclosed location at the New York Times DealBook Summit on Wednesday. Though he has lived in the Bahamas since FTX moved its headquarters there in 2021, Bankman-Fried’s current whereabouts are unclear.
Bankman-Fried confirmed he did, at one point, live with “one or two” members from the Alameda Research team, although he maintained the companies operated separately enough that he was not aware of margin positions and liquidity levels. Alameda, also founded by Bankman-Fried, is a now-insolvent crypto market maker.
Bankman-Fried said he was “frankly surprised at how big Alameda’s position was” in FTX’s native token, FTT, and that he was not worried about customer losses or potential insolvency until Nov. 2, when details of the trading firm’s balance sheet was published by CoinDesk.
“I substantially underestimated the scale of the crash and the speed of it,” he said of FTT’s collapse.
By Nov. 6, the founder said he was aware that customer funds were likely to be impacted and FTX would not likely be able to make customers whole. This was “the day the tweet about FTT” came out, Bankman-Fried said, referring to rival exchange Binance’s Changpeng ‘CZ’ Zhao’s viral announcement his company would be liquidating their FTT.
This timeline contradicts a now-deleted tweet from Bankman-Fried on Nov. 7 where he promised users client assets were not improperly invested elsewhere — a direct violation of the exchange’s terms of service.
As for FTX US, the exchange’s American subsidiary, Bankman-Fried said user funds should be safe.
FTX US is “totally solvent,” he said. “I’m confused why FTX US is not processing customer withdrawals right now.”
Bankman-Fried said he agreed to the interview against his lawyers’ recommendation, but he felt an obligation to speak, he said.
“Obviously, I don’t, I don’t personally think that I have, you know… I think the real answer is that’s not what I’m focusing on,” Bankman-Fried said about the likelihood of criminal charges being brought against him. “I’ve had a bad month.”
Asked if he would be able to travel to the US — where he would potentially come face-to-face with securities regulators — Bankman-Fried said, “to my knowledge, I could.”
Get the news in your inbox. Explore Blockworks newsletters:
- Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
- Empire: Start your morning with the top news and analysis to inform your day in crypto.
- Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
- 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
- Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
- The Drop: For crypto collectors and traders, covering apps, games, memes and more.
- Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.
