Sam Bankman-Fried Tries to Blame Market and CZ for FTX's Failure
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Sam Bankman-Fried Tries to Blame Market and CZ for FTX's Failure

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4 months ago

Despite being out on $250 million bail, FTX founder Sam Bankman-Fried released a long blog post blaming everyone from his lawyers to his biggest competitor for the exchange's bankruptcy.

Sam Bankman-Fried Tries to Blame Market and CZ for FTX's Failure

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Sam Bankman-Fried has released a long explanation of how and why FTX went bankrupt, why it shouldn't have, and how everyone but he himself is to blame.

He also repeated his claims that he could have saved FTX if he'd been allowed to continue raising funds instead of sending the firm into bankruptcy against his wishes. He blamed his lawyers for that.

What it did not touch on, at all, is how and why FTX customers' funds were allegedly illegally transferred to Bankman-Fried's private trading firm, Alameda Research, to shore up trading losses.

He does, however, give a lengthy explanation of why Alameda losses were the result of the crypto crash and other disasters in 2022, such as the collapse of LUNA and UST, as well as the failure of hedge fund Three Arrows Capital.

Bankman-Fried also attempts to blame Binance's CEO Changpeng Zhao — claiming he deliberately attacked FTX by undermining confidence in it and sparking a run. CoinMarketCap is owned by Binance. CZ has repeatedly refuted this, and said SBF only has himself to blame.

Another thing he did not do, for once, is take any blame, which has generally come in the form of "I f***** up" — a phrase which he'd planned to repeat in testimony before the House Financial Services Committee.
In the weeks before his arrest, Bankman-Fried did just that over and over in a series of high-profile "mea culpa" interviews to the New York Times, Wall Street Journal and Good Morning America, as well as several other crypto sources and journalists.

'I Didn't Stash Billions'

In his Jan. 12 "FTX Pre-Mortem Overview," Bankman-Fried again denies being a crook:
"I didn't steal funds, and I certainly didn't stash billions away."

He added that "nearly all of my assets were and still are utilizable to backstop FTX customers."

That includes "nearly all" of his $450 million worth of "personal shares" in stock and crypto trading app Robinhood — which he bought with funds borrowed from Alameda Research.

A number of other parties, notably the FTX bankruptcy team and bankrupt crypto lender BlockFi have laid claim to those shares, and the Justice Department has seized them.

Bankman-Fried also said that he was only talking about FTX International, which did not serve U.S. citizens.

That is because, he said, "FTX US is fully solvent and always has been."

The U.S. exchange's "funds and customers were segregated from FTX International" and it had $350 million in cash on hand above and beyond funds belonging to customers, he said. "It's ridiculous that FTX US users haven't been made whole and gotten their funds back yet."

As for Alameda, its net asset value was $100 billion at the start of 2022, he said, noting that even discounting some hard-to-sell assets, it had at least $50 billion. And had borrowed only $8 billion.

So what happened?

First, Blame the Market

The problem, he said, started with three things:

"BTC crashed 30%. BTC crashed another 30%. BTC crashed another 30%."

Then UST and LUNA collapsed, hedge fund Three Arrows Capital collapsed, and crypto lenders Voyager Digital and Celsius fell into bankruptcy, and BlockFi almost did — saved by an SBF bailout until FTX went under.

He then noted how much other crypto companies and assets lost: Coinbase and Robinhood shares about 85%; Bitcoin and Ether more than 60% each.

What his firms were responsible for, he said, was falling to hedge its market exposure to account for an "extreme market crash."

Second, Blame CZ

"In November 2022, an extreme, quick, targeted crash precipitated by the CEO of Binance made Alameda insolvent," Bankman-Fried said.

That refers back to Zhao's Nov. 6 tweet announcing that Binance was going to slowly sell off the roughly $500 million worth of FTX's native exchange token, FTT, over the next few months. That read:

"As part of Binance's exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books."

That was, Bankman-Fred said " a targeted attack on assets held by Alameda" that followed "an extremely effective months-long PR campaign against FTX."

What it does not mention is that a Nov. 2 press report by CoinDesk revealed that Alameda had $5.8 billion worth of FTT on its balance sheet, which it was using as collateral for loans from FTX. That eventually led exchange customers to fear FTX wouldn't be able to let them cash out. After Zhao said he was getting out, a run started.

Those were loans that, Justice Department prosecutors have alleged, consisted of FTX customers' funds that the exchange had no right to lend out to anyone — especially its sister company.

That is something Bankman-Fried did not address.

Third, Blame John Ray III

Bankman-Fried closed out the post by repeating old claims that the leadership team brought in to oversee FTX Group's bankruptcy stopped him from saving the companies.

That team was led by John Ray III, a restructuring expert who despite having overseen the winding down of Enron said FTX had "a lack of corporate controls that none of us in the profession ... have ever seen."

He added that the leadership included "compromised individuals" who had deliberately hidden the transfers of funds from FTX to Alameda.

Two of Bankman-Fried's top lieutenants, former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang, have pleaded guilty to fraud charges and agreed to testify against Bankman-Fried. A third, former FTX head of engineering Nishad Singh, is reportedly trying to do the same.

As for Bankman-Fried, he ended the blog post by claiming there "were billions of dollars of funding offers when Mr Ray took over, and more than $4 billion that came in after." He added:

"If FTX had been given a few weeks to raise the necessary liquidity, I believe it would have been able to make customers substantially whole ... I still think that, if FTX International were to reboot today, there would be a real possibility of making customers substantially whole."
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