6 Takeaways From SBF’s Deliberate Testimony Transcript


Bahamian authorities arrested FTX founder Sam Bankman-Fried Monday night time, simply hours earlier than he was scheduled to testify in entrance of the US Home Monetary Companies Committee.

Bankman-Fried faces prices within the US, together with wire fraud, conspiracy, securities fraud conspiracy and cash laundering.

With Bankman-Fried absent, FTX CEO John Ray, who beforehand oversaw restructuring efforts at firms akin to Enron, testified. He known as FTX’s collapse and related fraud “worse than Enron.”

Ray added that FTX’s restructuring group has secured greater than $1 billion in property thus far, and that it might take further months to recuperate extra.

Although FTX’s founder didn’t testify, Forbes obtained the transcript of Bankman-Fried’s deliberate testimony. Blockworks compiled key takeaways from the ready remarks.

Chapter regrets

Bankman-Fried was ready to say he deeply regretted signing the papers that led to FTX beginning the Chapter 11 chapter course of a number of days after he mentioned the trade turned “probably bancrupt.”

On the time of the chapter announcement on Nov. 11, Ray turned FTX’s new CEO. Ray mentioned a couple of week after taking up FTX that he had by no means seen “such an entire failure of company controls and such an entire absence of reliable monetary data.”

Bankman-Fried’s ready remarks state he had despatched 5 emails to Ray and that Ray had by no means responded. In a single electronic mail, the previous FTX CEO mentioned he wished to share data with Ray about potential future alternatives and financing for FTX and its collectors.

Attorneys representing FTX and associates mentioned in a chapter movement final month that as many as a million collectors could possibly be named within the swimsuit.

Clients might probably be made complete

Bankman-Fried was set to testify that he’s nonetheless conscious of “severe affords for financing” amounting to billions of {dollars} that would probably make FTX prospects complete.

“Nevertheless, I consider that each one of these are conditional on FTX being restarted as an trade,” the deliberate transcript states. “I sincerely hope that all the international groups engaged on FTX are severely contemplating such a chance, as a result of I consider it will drive a considerable amount of worth to prospects and collectors.”

Bankman-Fried had deliberate so as to add that he believes FTX US has been and stays solvent and “might repay all of its prospects in full tomorrow.” However, he provides, the Chapter 11 group has frozen the FTX US trade, blocking prospects’ entry to their account data and funds.

Alameda’s monetary place

Bankman-Fried believes Alameda Analysis, the crypto buying and selling agency he based in 2017, had a internet asset worth of “considerably over $50 billion, marked to market” in late 2021, in accordance with the transcript. At the moment, it had corresponding property for about 90% of its place, borrowing the remaining 10%.

Final month, over a three-day interval, Bankman-Fried was set to testify, he believes the market worth of Alameda Analysis’s property declined by greater than 50%, leaving it with about $11 billion in property and $11 billion in liabilities. Roughly $3 billion of these property had been extremely liquid, leaving a liquidity shortfall of about $8 billion.

Deflecting accountability…kind of

The opening line within the transcript is: “I wish to begin by formally stating, below oath: I f*cked up.”

However Bankman-Fried supposed to say Binance CEO Changpeng Zhao’s tweet on Nov. 6 that said the rival trade supposed to promote its holdings of FTX token FTT.

“The tweet adopted what I consider to be a month of sustained damaging PR on FTX largely being pushed by Binance,” the transcript says. “Alameda’s hedges failed in November 2022 as a result of the crash was particular to its hedges, triggered by the identical PR marketing campaign by [Zhao].”

A Binance spokesperson didn’t instantly return a request for remark.

Bankman-Fried was set to say that he started FTX by routinely working 18-hour days however was working about 30% lower than that for a lot of this yr.

“I believed I might maintain FTX collectively regardless of the growth,” the transcript says. “I used to be fallacious. I bit off greater than I might chew, and ended up failing to deal with threat administration.”

Potential Binance purchase of FTX seemingly by no means had legs

Binance expressed its intent to accumulate FTX on Nov. 8 however backed out a couple of day later.

Bankman-Fried was slated to testify: “As finest I can inform, Binance by no means supposed to undergo with the deal.”

The ex-CEO was prohibited from responding to different potential buyers as a result of letter of intent it signed with Binance

“There may be far more to say about Binance, its function within the cryptocurrency ecosystem, and its relationship with FTX, however that is neither the place nor the time for it.”

Addressing different claims in opposition to him

Although SBF was ready to say that he “exhibited poor threat administration oversight” as FTX’s CEO, he was going to rebuff claims that he tried to govern Tether after the November crash.

He was additionally set to disclaim claims that he took actions to set off the implosion of Three Arrows Capital earlier this yr, or that he secretly has billions of {dollars} stashed away. As a substitute, he mentioned, he has a checking account with roughly $100,000 in it.

“I’m unsure that I’m going to have the ability to pay all the authorized charges I’m more likely to rack up,” the deliberate transcript states. “And I’m unsure what to do about that.”

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