NASSAU, BAHAMAS — FTX founder and former CEO Sam Bankman-Fried has agreed to testify at a special hearing before the US House committee on financial services tomorrow, December 13.
In a series of tweets on Friday, Bankman-Fried explained there was a limit on what he would be able to divulge because he still did not have access to much of his professional or personal data.
“I will try to be helpful during the hearing, and to shed what light I can on: FTX US’s solvency and American customers; pathways that could return value to users internationally; what I think led to the crash; my own failings.”
He wrote: “I had thought of myself as a model CEO, who wouldn’t become lazy or disconnected. Which made it that much more destructive when I did.
“I’m sorry. Hopefully people can learn from the difference between who I was and who I could have been.”
It comes as investigators, analysts, and customers continue to seek answers surrounding the epic failure of the exchange, particularly whether FTX broke its terms of service with customers and comingled funds with Bankman-Fried’s research trading firm Alameda Research.
In a recent Twitter Spaces forum, Bankman-Fried said FTX “may have allowed just generalized withdrawals” in the days surrounding the crash.
“I’m specifically talking about what happened in the days immediately during and following the cash, in that three or so day period, and during that period I think we may have allowed just generalized withdrawals,” Bankman-Fried said.
“I think that was if you’re saying we should have held up withdrawals for everyone that had an open futures position, for clawback potential or something like that, I don’t know maybe that would have been the right thing to do. I hear where you’re coming from on that. I felt at the time that we wanted to treat customers equally.”
He was responding to questions from YouTuber Coffeezilla (Stephen Findeisen) who pressed him to account for the digital assets of users who did not agree to participate in risky margin trading and therefore should have had their assets kept separate as stated in its terms of service.
Bankman-Fried said: “I make a decision there I just, we processed withdrawals as we normally do until it became clear we couldn’t anymore at which point we shut them off. And it was the case that like at that point there was a big liquidity hole, that’s what happened. If you want to judge that process and think we should have spent those days frantically trying to code up a new withdrawal process, I disagree with you but I understand where you’re coming from.”
Bankman-Fried stepped down as CEO after FTX filed for chapter 11 bankruptcy last month, with filings claiming more than 1 million in individual creditors.
In an interview with Our News, Bankman-Fried said he was still “piecing together” what led to the collapse.
He pointed ultimately to a massive crash at Alameda Research, which accepted deposits from FTX users in the early days when the exchange did not have a bank account.
“At the start of November in a few day period, there is a massive crash in specifically the assets that it held, triggered by a PR campaign against it and that led it to become insolvent and then effectively fail on its obligations to FTX, which caused FTX, in turn, be unable to deliver on all the user withdrawals especially given the run on the bank that happened around the same time,” Bankman-Fried told Our News in an interview released yesterday.
He furthered that he should have acted sooner to search for funding, and may have not sought bankruptcy if he had better legal advice.
“Before the filing, there were lots of parties who had indicated significant interest…It spanned everything from crypto native companies to companies that were completely outside the digital assets ecosystem. It spanned from private equity firms, sovereign wealth funds, venture capital firms individuals projects there was a wide array of them.”
Bankman-Fried said: “These were all discussions, I think I got some bad legal advice…If I had given it an extra week that would have been meaningful. There was a line for billions of dollars minutes after I clicked a document on docu sign (to file for bankruptcy) and I certainly read it and tried to retract it and I don’t think those wishes were necessarily followed.”
In another series of tweets on Friday, Binance CEO Changpeng “CZ” Zhao fired back at suggestions his company’s decision to pull out as an investor contributed in any way to FTX’s collapse.
“We continue to do due diligence even after we make an investment,” Zhao said.
“As an early investor in FTX, we became increasingly uncomfortable with Alameda/SBF and initiated the exit process more than 1.5 years ago.”
Zhao wrote: “Sam was so unhinged when we decided to pull out as an investor that he launched a series of offensive tirades at multiple Binance team members, including threatening to go to “extraordinary lengths to make us pay” – we still have those text messages.
“Shortly after that Sam began “investing” in friends in high places – from media, to policymakers, to celebrities (like Kevin). And he used that network to manipulate public opinion, including attacking me and others in the industry.”
He added: “You don’t have to be a genius to know something don’t smell right at FTX. They were 1/10th our size, yet outspent us 100/1 on marketing & “partnerships”, fancy parties in the Bahamas, trips across the globe, and mansions for all of their senior staff (and his parents).”
In his response, Bankman-Fried accused Zhao of lying.
“You threatened to walk at the last minute if we didn’t kick in an extra ~$75m,” Bankman-Fried replied.
“We did it anyway because this just made us feel more confident we didn’t want Binance on our cap table. But again, none of this is necessary. You won. Why are you lying about this now?”
Bankman-Fried added: “Among other things, as you know, you didn’t even have the rights to pull out as an investor unless we chose to buy you out–much of the tokens/equity were still locked.”
