Former FTX Boss Sam Bankman-Fried Admits He Should Have Done More Stress Testing Before Crypto Firm Collapsed

Former FTX Boss Sam Bankman-Fried Admits He Should Have Done More Stress Testing Before Crypto Firm Collapsed

Sam Bankman-Fried made another public appearance on Tuesday in an effort to explain his version of the collapse of FTX, the cryptocurrency exchange he ran and the reported transfer of billions of dollars in client funds from FTX to Alameda Research, the now-bankrupt hedge fund he founded.

Robert Mowry, a Rekt Tech partner who started trading on FTX in 2019, hosted an hour-long chat with Sam Bankman-Fried on Twitter Spaces that ended with a relatively short but pointed Q&A. with other attendees.

Bankman-Fried was asked about recent comments he made about appearing before Congress in the near future while suggesting he may not be ready to appear before the Financial Services Committee of the House scheduled for Dec. 13 by Speaker Maxine Waters (D-CA). He tweeted on Sunday: “Once I am done learning and considering what happened I will feel like it was my duty to come before the committee and explain myself. . I’m not sure that will happen by the 13th. But when it does, I’ll have him testify.”

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Sam Bankman Fried

Sam Bankman-Fried, Founder and Managing Director of FTX Cryptocurrency Derivatives Exchange, speaks at the Institute of International Finance (IIF) Annual Members Meeting in Washington, DC, U.S., Thursday, October 13, 2022. (Photographer: Ting Shen/Bloomberg via Getty Images/Getty Images)

Mowry asked if he had made any progress in learning what happened. Bankman-Fried replied, “I’m working on it, I don’t have access to a lot of data right now” and added, “I’m sure I’ll testify at some point.”

Bankman-Fried said he expects the upcoming hearing to focus on a “medley of things”, but added: “I would like to see a focus on customers and what can be done for the customers, you know, what’s going on with FTX USA and you know, why didn’t they refund the funds to the customers?”

He raised a similar point about FTX’s US business entity during last week’s interview at the New York Times’ DealBook Summit. FTX’s US and Bahamian entities are in bankruptcy proceedings.

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Asked about the implosion of his companies and the role played by Caroline Ellison, the CEO of Alameda Research who was allegedly Bankman-Fried’s ex-girlfriend, he replied “I’m not sure what happened. happened” and that “she had an incredibly hard job”. and I think she tried to do well and I don’t know who thought what when.” He added, “I don’t think she ever had any malicious intent.”

FTX has reportedly lent up to $10 billion in funds from exchange clients to Alameda, and Bankman-Fried said last week that it “did not knowingly mix funds” despite faulty oversight on its part. He said he walked away from decision-making at Alameda because he feared a conflict of interest might arise.

The Wall Street Journal previously reported that Ellison told Alameda staff that FTX transferred client funds so that the hedge fund could meet its debts, and that she, Bankman-Fried and other members of the companies’ management were at stream of the decision.

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Bankman-Fried asked several questions about his inability to run FTX stress tests involving a collapse of the cryptocurrency assets he relied on. He said: “At the end of the day, I really wish we had gone through more rigorous stress testing. What I mean is what FTX would look like in a real crash scenario, I didn’t think at an 80 or 90 percent crash, but obviously that’s what happened.”

“It’s one of those areas where I absolutely could have pulled myself together much sooner and should have had and one of those areas that I should have been aware of because it happens, you know, this ain’t the first time we’ve seen a big, you know, stock market crash,” Bankman-Fried added.

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maxine waters sam fried banker

House Financial Services President Maxine Waters (D-California) said Friday she wants FTX founder Sam Bankman-Fried to testify at the December 13 hearing into the crypto meltdown. change. (Getty Images/Getty Images)

During the Q&A portion of the interview, David Gokhshtein asked him why he was running the company without a dedicated CFO. Bankman-Fried replied, “We have audited financials every year, audited by an outside accounting firm. We had an accounting team. We had a finance team that worked on that and got them. And I looked the audited financial statements when they came out come out every year and I looked at the drafts before they came out.”

Bankman-Fried went on to say that the reason FTX’s precarious financial stake in Alameda did not appear on these financial statements is “because the financial statements were the financial statements of FTX’s business, not the risk analysis of user positions on FTX”.

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The former CEO of FTX explained his acquisitions and investments in a number of other crypto companies saying, “I thought I could take the industry forward and I don’t think I ended up doing it, that’s the less we can say.”

He also opened up about his current legal situation given his previous comments that he only had $100,000 left in the bank and a working credit card. “As far as paying legal fees, I’m still figuring it out and don’t necessarily have a long-term plan yet,” Bankman-Fried said.

A member of its communications team confirmed to Fox Business that Bankman-Fried had retained Mark Cohen as an attorney. Cohen previously represented Jeffrey Epstein confidante Ghislaine Maxwell and Mexican drug lord El Chapo.

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FTX Logo Sam Bankman Fried

This photo illustration shows a smartphone screen displaying the logo of FTX, the crypto exchange, with a screen showing the FTX website in the background. ((Photo by OLIVIER DOULIERY/AFP via Getty Images) / Getty Images)

Silvergate Bank’s role in moving funds from FTX to Alameda was at the center of the conversation when the host opened up the Twitter space for attendees to ask Bankman-Fried questions.

Bankman-Fried acknowledged that “Yes, some people have used this bank,” but did not directly specify that it served as a conduit for funds transferred from FTX to Alameda. Documents from the company’s bankruptcy filing indicate that FTX, some of its affiliates, and hedge fund Alameda Research all bet on Silvergate.

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A bipartisan trio of senators from the Senate Banking Committee sent a letter to Silvergate on Tuesday requesting information about its role in the FTX-Alameda transaction. The senators’ letter noted that Silvergate’s extended depository services at Alameda and FTX “appear to be at the center of inappropriate transfers of customer funds.”

The senses. John Kennedy (R-La.), Roger Marshall (R-Kan.), and Elizabeth Warren (D-Mass.) wrote, “Your bank’s involvement in moving FTX client funds to Alameda reveals what seems be a flagrant breach of your bank’s responsibility to monitor and report suspicious financial activity by its customers. The public is held accountable for all financial activity that may have resulted in the loss of billions in customer assets, and any role Silvergate may play. played in those losses.”

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Silvergate markets itself as “the leading bank for innovative fintech and cryptocurrency companies” and in September nearly 90% of its deposit base came from crypto firms according to the senators.

Following FTX’s bankruptcy, Silvergate issued a statement saying that it “has no outstanding loans or investments in FTX” and that, “As a well-capitalized federally regulated banking institution, we maintain a strong balance sheet with sufficient cash to support our customers’ needs.”

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Since September, senators noted that Silvergate’s average deposits have fallen by more than $2 billion. In addition to FTX, another Silvergate client that went bankrupt amid the crypto contagion is BlockFi – which was knocked down by its exposure to FTX but appears to have had better corporate controls than FTX by its bankruptcy filings.

Bankman-Fried concluded his appearance on Twitter Spaces by reiterating his goal of recovering what remains of clients’ assets and saying, “I’m incredibly sorry and I believe there are things to come that will help clients. I I’ll keep soul-searching about what happened and I’m so sorry.”

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