6 Takeaways From SBF’s Planned Testimony Transcript

Former FTX CEO regrets filing for bankruptcy and is still aware of “serious offers for financing” that could make customers whole, according to prepared remarks.

article-image

FTX’s Sam Bankman-Fried | Blockworks exclusive art by Axel Rangel

share

Bahamian authorities arrested FTX founder Sam Bankman-Fried Monday night, just hours before he was scheduled to testify in front of the US House Financial Services Committee.

Bankman-Fried faces charges in the US, including wire fraud, conspiracy, securities fraud conspiracy and money laundering. 

With Bankman-Fried absent, FTX CEO John Ray, who previously oversaw restructuring efforts at corporations such as Enron, testified. He called FTX’s collapse and associated fraud “worse than Enron.”

Ray added that FTX’s restructuring team has secured more than $1 billion in assets so far, and that it could take additional months to recover more.

Though FTX’s founder didn’t testify, Forbes obtained the transcript of Bankman-Fried’s planned testimony. Blockworks compiled key takeaways from the prepared remarks.

Bankruptcy regrets

Bankman-Fried was prepared to say he deeply regretted signing the papers that led to FTX starting the Chapter 11 bankruptcy process a few days after he said the exchange became “potentially insolvent.”

At the time of the bankruptcy announcement on Nov. 11, Ray became FTX’s new CEO. Ray said about a week after taking over FTX that he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information.”

Bankman-Fried’s prepared remarks state he had sent five emails to Ray and that Ray had never responded. In one email, the former FTX CEO said he wanted to share information with Ray about potential future opportunities and financing for FTX and its creditors.

Lawyers representing FTX and affiliates said in a bankruptcy motion last month that as many as one million creditors could be named in the suit.

Customers could potentially be made whole

Bankman-Fried was set to testify that he is still aware of “serious offers for financing” amounting to billions of dollars that could potentially make FTX customers whole.

“However, I believe that all of those are conditional on FTX being restarted as an exchange,” the planned transcript states. “I sincerely hope that all of the global teams working on FTX are seriously considering such a possibility, because I believe it would drive a large amount of value to customers and creditors.”

Bankman-Fried had planned to add that he believes FTX US has been and remains solvent and “could pay off all of its customers in full tomorrow.” But, he adds, the Chapter 11 team has frozen the FTX US exchange, blocking customers’ access to their account information and funds.

Alameda’s financial position

Bankman-Fried believes Alameda Research, the crypto trading firm he founded in 2017, had a net asset value of “substantially over $50 billion, marked to market” in late 2021, according to the transcript. At that time, it had corresponding assets for about 90% of its position, borrowing the remaining 10%.

Last month, over a three-day period, Bankman-Fried was set to testify, he believes the market value of Alameda Research’s assets declined by more than 50%, leaving it with about $11 billion in assets and $11 billion in liabilities. Roughly $3 billion of those assets were highly liquid, leaving a liquidity shortfall of about $8 billion.

Deflecting responsibility…sort of 

The opening line in the transcript is: “I would like to start by formally stating, under oath: I f*cked up.”

But Bankman-Fried intended to mention Binance CEO Changpeng Zhao’s tweet on Nov. 6 that stated the rival exchange intended to sell its holdings of FTX token FTT.

“The tweet followed what I believe to be a month of sustained negative PR on FTX largely being driven by Binance,” the transcript says. “Alameda’s hedges failed in November 2022 because the crash was specific to its hedges, triggered by the same PR campaign by [Zhao].”

A Binance spokesperson did not immediately return a request for comment. 

Bankman-Fried was set to say that he began FTX by routinely working 18-hour days but was working about 30% less than that for much of this year. 

“I thought I could hold FTX together despite the expansion,” the transcript says. “I was wrong. I bit off more than I could chew, and ended up failing to focus on risk management.”

Potential Binance buy of FTX likely never had legs 

Binance expressed its intent to acquire FTX on Nov. 8 but backed out about a day later. 

Bankman-Fried was slated to testify: “As best I can tell, Binance never intended to go through with the deal.” 

The ex-CEO was prohibited from responding to other potential investors due to the letter of intent it signed with Binance

“There is much more to say about Binance, its role in the cryptocurrency ecosystem, and its relationship with FTX, but this is neither the place nor the time for it.” 

Addressing other claims against him

Though SBF was prepared to say that he “exhibited poor risk management oversight” as FTX’s CEO, he was going to rebuff claims that he attempted to manipulate Tether after the November crash.

He was also set to deny claims that he took actions to trigger the implosion of Three Arrows Capital earlier this year, or that he secretly has billions of dollars stashed away. Instead, he said, he has a bank account with roughly $100,000 in it. 

“I’m not sure that I’m going to be able to pay all of the legal fees I’m likely to rack up,” the planned transcript states. “And I’m not sure what to do about that.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495B in value locked, doubling Uniswap's Base deployment.

article-image

The former Valkyrie CEO chats with Blockworks about what she has her eye on as Cypherpunk Holdings’ new leader

article-image

Thursday’s CPI report shows prices are coming down more quickly than analysts had anticipated, renewing hope that central bankers will cut rates in the fall

article-image

If we tokenize all assets in a speculative rush, the risk of creating illiquid markets and trapped value will manifest on a large scale

article-image

Plus, Trump is headed to the heart of Bitcoinlandia with a speaking appearance at the Bitcoin 2024 conference

article-image

Meanwhile, stocks rally after Jerome Powell finishes his Capitol Hill tour

article-image

Plus, Blinks have reshaped many people’s understanding of what blockchains are capable of