The bankrupt crypto exchange's former CEO, Sam Bankman-Fried, also told Good Morning America he "wasn't even trying" to manage risk.
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Sam Bankman-Fried made a couple of "stunning" admissions in an interview with Good Morning America's George Stephanopoulos released on Dec. 1.
In just a few weeks in November, the embattled crypto entrepreneur saw his $32 billion empire of FTX and Alameda Research spiral into bankruptcy that left as many as one million customers likely wiped out.
The problem was that Alameda was getting clobbered by the crypto winter, and allegedly borrowed $10 billion of FTX customers' money, losing $8 billion of it.
In a short clip from his second major interview, Bankman-Fried made a "stunning admission" about his lack of risk management and came as close as he has yet to answering the biggest question on many people's mind: Did he know about the commingling of FTX and Alameda funds?
Here's a look at four key moments in the conversation:
'Why wasn't I on top of my game?'
Bankman-Fried was asked by Stephanopoulos:
"How do you explain the failure? Was it inattention, arrogance? Was it unethical?"
After saying he'd spent a lot of time over the past month — FTX's real problems began on Nov. 6 and the bankruptcy filing was on Nov. 11 — he said:
"Why wasn't I on top of my game? My sense is that some of it was just literal distraction. I really should have taken some time each day taking a step back and saying, 'What are the most important things here, and how do I have oversight of those and make sure that I'm not losing sight of those."
Admitting that he paid a lot of attention to trading volume — where FTX made its money on transaction fees — Bankman-Fried said:
"I spent a lot less time looking at assets and looking at balances and positions, because that's not where revenue came from. And so I wasn't seeing it as a core business driver. Obviously it was a core risk."
'I wasn't even trying'
From there the conversation went like this:
GS: You said one of your great talents in a podcast was managing risk.
SBF: That's right, and…
GS: That's obviously wrong!
SBF: I think there is something even deeper wrong there, which is I wasn't even trying. I wasn't even spending any time and effort trying to manage risk on FTX.
GS: That's a pretty stunning admission.
SBF: If I had been spending an hour a day on risk management at FTX I don't think that would have happened. I think I I stopped working as hard for a bit. Honestly, if I look back on myself, I think I stopped working as hard for a bit. You know, honestly, if I look back on myself, I think I got a little cocky — more than a little bit.
'I'm not Bernie Madoff'
"A lot of people look to you and see Bernie Madoff," Stephanopoulos told Bankman-Fried.
He responded:
"I don't think that's who I am at all at all. But I understand why they're saying that people lost money, and people lost a lot of money. When you look at the classic Bernie Madoff story, there is no real business there… it was just one big Ponzi scheme, right? FTX, that was a real business."
Did you know?
Stephanopoulos pushed three times to get Bankman-Fried to answer what's probably the key question for both civil litigation and possibly criminal investigations. Did he know customer funds were being improperly commingled with his own at Alameda — something FTX's terms of service said specifically would not happen.
Alameda Research CEO Caroline Ellison, who was reportedly Bankman-Fried's on-and-off girlfriend, has said Bankman-Fried knew that FTX funds were being improperly funneled to her firm.
The first few times he was asked, Bankman-Fried hemmed and hawed, saying there were various circumstances in which they could properly be mingled.
Stephanopoulos finally asked:
"If she's in court and you're in court and she's under oath and you're under oath, and you're asked 'Did you know that these funds were being funneled to Alameda,' what is your answer?
Bankman-Fried was silent for a very long six seconds.
He finally said:
"I did not know that there was any improper use of customer funds."
