Sam Bankman-Fried responds to fraud allegations: ‘I did not steal funds’

Sam Bankman-Frieddisgraced cryptocurrency executive, on Thursday made his first detailed response to the criminal charges brought against him last month, claiming that the millions of customers on its collapsed exchange, FTX, could still get their money back.

In a statement released on understitch, Mr Bankman-Fried said “a very significant recovery remains potentially available”.

“I did not steal funds and I certainly did not hide billions,” he wrote. “Almost all of my assets were and still can be used to support FTX customers.”

His statement came a day after lawyers overseeing FTX’s bankruptcy said in court that they had recovered at least $5 billion in funds. Mr Bankman-Fried cited this announcement to try to support his point that FTX customers could still be made “essentially whole”. It is unclear whether he checked his statement with his legal team before releasing it.

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

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

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

A spokesman for Damien Williams, the United States attorney for the Southern District of New York who is prosecuting Mr. Bankman-Fried, declined to comment.

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

Mr Bankman-Fried’s statement on Thursday repeated a narrative he has put forward before – and which US prosecutors, regulators and industry experts have strongly rejected. The publication laid out a detailed timeline of Alameda’s financial situation, which was closely tied to FTX, arguing that the firm lost money as a result of a market crash it was not prepared for.

Mr. Bankman-Fried’s statement also blamed FTX’s failure in part on an attack by its biggest competitor, Binance.

“No funds were stolen,” he wrote.

But even as he described Alameda’s finances, Mr. Bankman-Fried also claimed that he had not run the firm “for the last several years” and did not have access to all of its financial information. Regulators and prosecutors allege that he was in fact intimately involved in Alameda’s management and orchestrated a system that allowed the company to borrow an essentially unlimited amount of money from FTX’s customer deposit pool.

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

On Wednesday, a bankruptcy attorney for FTX told a federal judge that the exchange has recovered more than $5 billion in cash and crypto assets — significantly more than the company 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, an attorney at Sullivan & Cromwell, also told the judge overseeing FTX’s bankruptcy in Delaware that the legal team has identified more than nine million customer accounts at the crypto exchange.

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

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

FTX is also exploring whether it could sell about $4.6 billion in investments the company has made in other businesses, mostly crypto companies.

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

Mr Bankman-Fried also accuses Sullivan & Cromwell, which did legal work for FTX before the stock market collapse, of pressuring him to put the company into bankruptcy and allowing a restructuring lawyer, John Jay Ray IIIpoems for him.

In his statement, Mr. Bankman-Fried included excerpts from what appeared to be financial statements and balance sheets for FTX. Mr. Ray, in bankruptcy court, devastated former FTX management 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 Mr. Bankman-Fried’s post was a gift to prosecutors and certainly created 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,” Ms. Penza said. “If I was prosecuting the case, I’d want him to keep talking, and if I was defending him, I’d tell him to shut up.”

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

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

“Unfortunately, the DOJ decided to arrest me the night before, pre-empting my testimony with a completely different news cycle,” he wrote, referring to the DOJ.

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