Sam Bankman-Fried denies stashing away FTX Funds

The FTX founder faces numerous federal charges including conspiracy to commit fraud and is now free on bail in California

Sam Bankman-Fried, the disgraced former chief of FTX, denied stashing away billions of dollars and gave his take on what happened to his bankrupt crypto exchange in a lengthy new post on Substack published Thursday.

He denied stealing funds and claimed FTX and sister company Alameda Research collapsed because of the crypto market meltdown and inadequate hedging on Alameda’s part.

I didn’t steal funds, and I certainly didn’t stash billions away, Bankman-Fried wrote. Later in the post, he concluded that ‘Alameda lost money due to a market crash it was not adequately hedged for.’

While alleging the trading firm ‘failed to sufficiently hedge its market exposure,’ he also said he ‘hasn’t run Alameda for the last few years.’

FTX International and Alameda were both legitimately and independently profitable businesses in 2021, each making billions, he wrote in the post titled “FTX Pre-Mortem Overview.”

However, the broader crypto environment took a turn when Three Arrows Capital and other firms collapsed in the spring of 2022, he explained. That helped sink the asset values of nearly every major token, including bitcoin, ether, solana, and others.

Alameda lost ‘about 80 percent’ of its assets’ value last year, Bankman-Fried said, which subsequently dragged down FTX in the same way that Three Arrows’ decline contaminated the likes of Voyager and others.

However, he cautioned that he is estimating some figures due to lack of access to some records.

Many of my personal passwords are still being held by the Chapter 11 team–to say nothing about data, he wrote. If the Chapter 11 team wants to add their data to the conversation, I would welcome that.

Bankman-Fried faces numerous federal charges including conspiracy to commit fraud and is now free on bail at his parents’ home in California. He has pleaded not guilty to the charges, but his lieutenant and Alameda chief Caroline Ellison pleaded guilty to fraud charges and is now cooperating with an investigation in the Southern District of New York.

While casting the blame of FTX’s downfall on Alameda’s poor hedging, Bankman-Fried notably didn’t address the $65 billion line of credit he opened from the exchange to the trading arm, as revealed in a court hearing on Wednesday. At the hearing, a lawyer representing FTX in its Chapter 11 bankruptcy proceedings said the credit line has led to a ‘shortfall in value’ in repaying customers and creditors.

In three instances in his note, Bankman-Fried called an announcement by crypto exchange Binance to withdraw funds from Alameda in early November that set off a run on the FTX exchange a ‘targeted attack.’

The November crash was a targeted attack on assets held by Alameda, not a broad market move. As a result, the larger hedge that Alameda had finally put on that summer didn’t end up helping. It would have for every previous crash that year – but not for this one, Bankman-Fried wrote. Over the course of November 7th and 8th, things went from stressful but mostly under control to clearly insolvent.

He insisted that FTX’s U.S. arm remains solvent and can be used to repay customers. He also said he plans to use nearly all his personal assets to help customers who lost money and says he has ‘offered to contribute nearly all’ of his personal Robinhood Markets (HOOD) shares to customers.

Bankman-Fried stepped down as the head of his crypto empire in November, and FTX filed for Chapter 11 bankruptcy, which he has since said was a regrettable decision.

New CEO John Ray III has accused Bankman-Fried and his deputies of incompetence, inexperience, and haphazard bookkeeping.

Meanwhile, court filings show Bankman-Fried seeking to retain control of the roughly 56 million Robinhood shares (worth around $450 million) to pay his legal fees. The disputed shares have since been seized by the Justice Department.