FTX founder makes first detailed response to fraud charges

FTX filed for bankruptcy in November after a run on customer deposits exposed an $8 billion hole in its accounts. Bankman-Fried, 30, was then arrested last month at his home in the Bahamas, where FTX was based, and swiftly extradited to the United States. Federal prosecutors in Manhattan have charged him with fraud, money laundering and campaign finance violations.

Authorities say Bankman-Fried siphoned billions of dollars in customer deposits from FTX and used the funds to purchase luxury real estate, invest in other companies, make political contributions and fund cryptocurrency trading at Alameda Research, the hedge fund he also owned.

The FTX founder was released last month on a $250 million bond under strict conditions that require him to remain confined to his parents’ home in Palo Alto, California. In a brief court appearance in New York last week, he pleaded not guilty to the criminal charges.

A spokesperson for Damian Williams, the U.S. attorney for the Southern District of New York, which is prosecuting Bankman-Fried, declined to comment.

A spokesperson for Bankman-Fried and his legal team declined to comment.

Bankman-Fried’s statement Thursday reiterates a narrative he has advanced before — and that U.S. prosecutors, regulators and industry experts have roundly rejected. The post laid out a detailed timeline of the financial situation at Alameda, which was closely tied to FTX, arguing that the firm lost money as a result of a market crash that it was unprepared for.

Bankman-Fried’s statement also blamed FTX’s failure partly on an attack by its largest rival, Binance.

“No funds were stolen,” he wrote.

But even as he outlined Alameda’s finances, Bankman-Fried also asserted that he hadn’t run the firm “for the past few years” and didn’t have access to all of its financial information. Regulators and prosecutors have argued that he was in fact intimately involved in Alameda’s management and orchestrated a system that allowed the company to borrow essentially an unlimited amount of money from FTX’s pool of customer deposits.

His statement did not address the guilty pleas from two of his former top executives, Caroline Ellison and Gary Wang, both of whom are cooperating with prosecutors. Ellison, who once dated Bankman-Fried, was the head of Alameda when the firm collapsed, and Wang founded FTX with Bankman-Fried.

On Wednesday, a bankruptcy lawyer for FTX told a federal judge that the exchange had recovered more than $5 billion of cash and crypto assets — considerably more than the company had previously said it had on hand. The announcement raised hopes that FTX might be able to return some money to its millions of creditors and customers around the world.

Andrew Dietderich, a lawyer with the firm Sullivan & Cromwell, also told the judge overseeing FTX’s bankruptcy in Delaware that the legal team had identified more than 9 million customer accounts at the crypto exchange.

In an email after the bankruptcy hearing, Dietderich said that of the $5 billion in newly recovered assets, approximately $1.7 billion was in cash.

He said the newly recovered assets did not include roughly $20 million in cash and $484 million in shares in the online trading company Robinhood that federal prosecutors had seized from a separate company Bankman-Fried set up in Antigua. He also said FTX’s new management believes the Robinhood shares and the seized cash should be distributed to FTX creditors.

FTX also is looking at whether it can sell about $4.6 billion in investments the company had made in other businesses, mostly crypto companies.

In his statement Thursday, Bankman-Fried said he had previously offered “to contribute nearly all of my personal shares in Robinhood to customers” if FTX agreed to help him pay his legal bills. He recently filed a motion in bankruptcy court arguing that those shares are his personal property and that he needs to sell some of them to pay his lawyers.

Bankman-Fried also blames Sullivan & Cromwell, which had done legal work for FTX before the exchange’s collapse, with pressuring him to put the company into bankruptcy and letting a restructuring lawyer, John J. Ray III, take over for him.

In his statement, Bankman-Fried included excerpts from what appear to be financial statements and balance sheets for FTX. Ray, in a bankruptcy court filing, savaged the former management of FTX and said there was “a complete failure of corporate control” and the company’s financial statements should not be trusted.

Moira Penza, a former federal prosecutor now in private practice, said Bankman-Fried’s post was a gift to prosecutors and surely creating headaches for his legal team.

“The most powerful evidence a prosecutor can have is the defendant’s own words, and Bankman-Fried is giving the government a gift,” Penza said. “If I were prosecuting the case, I would want him to keep talking, and if I were defending him I would be telling him to shut his mouth.”

After FTX collapsed, Bankman-Fried gave a series of interviews about the implosion. But since he was released on bail last month, he has been relatively quiet, save for a few tweets, until now. He has entertained a handful of visitors at his parents’ home, including author Michael Lewis, who is writing a book about him; crypto YouTube personality Tiffany Fong; and a reporter for the online publication Puck.

In his post, Bankman-Fried said he had hoped to respond in detail to the allegations against him much earlier, starting with testimony he had planned to deliver to the House Financial Services Committee on Dec. 13.

“Unfortunately, the DOJ moved to arrest me the night before, preempting my testimony with an entirely different news cycle,” he wrote, referring to the Department of Justice.

This article originally appeared in The New York Times.

By David Yaffe-Bellany and Matthew Goldstein