Sam Bankman-Fried (SBF), former CEO of FTX, the collapsed exchange, admitted that he was not entirely sure what happened to FTX’s money and its clients while he was CEO. Claiming, further, that Alameda Research did use FTX client money, although he later excused himself by commenting that he was “not 100% sure.”
In a Twitter Space held on December 1 by investor Mario Nawfal, founder of the IBC group, SBF faced the community in an attempt to answer their questions about the FTX bankruptcy and his position as CEO during the collapse.
From the outset, the questions were quite incisive, questioning whether the former CEO knew about the movements that occurred with FTX funds. Bankman-Fried maintained an evasive stance to the questions, arguing that he “didn’t know enough facts”, that he “doesn’t know what was going on” or that he “didn’t remember” certain situations. SBF said he was with his legal advisors, who would assist him in giving this interview.
Chet Long, co-founder with Nawfal of IBC group, was one of the most incisive about how much SBF knew about the moves between FTX and Alameda Research, a company founded by Bankman, and which served as FTX’s investment hand.
In one of the questions, Long asked whether SBF was aware that FTX’s funds, which were mostly from its users, were used by Alameda Research. As Long explained, Alameda made use of about 50% of all FTX capital in investments, and he asked SBF if it was aware of this situation. The former CEO merely commented that “that may be what happened” to cause FTX to end up in bankruptcy, but that he was “not 100% sure” because Alameda was supposedly an independent subsidiary.
Long also questioned SBF on the issue of “legal liability with customer money” asking Sam Bankman-Fried if he was aware that there was a legal commitment, written into the terms and conditions, that the exchange could not make use of customer money. Sam merely commented that the terms and conditions were “overwritten”, implying to the guests that this “legal liability” no longer existed.
Sam Bankman-Fried did not know where the funds were going.
In the interview, which gradually turned into an interrogation, SBF explained that the situation of not having funds to withdraw was due to leverage. To which one of the participants, Ran Neuner, questioned that, although this was happening within the derivatives section, what was happening with the spot funds.
Spot trading refers to spot trading, i.e., one asset is sold and another is received immediately, as a form of payment. Unlike futures trading, which is executed through contracts and paid when the contract is closed.
In the spot market, funds, by market logic, must be 100% liquid since they are spot deals. SBF commented that he didn’t know what was going on, trying to explain that leverage contributed to the FTX drop. But then he contradicted himself by admitting that Alameda Research’s use of client money and falling market prices were the “possible” culprits.
Sam commented that, despite not being at the helm as CEO of FTX, he wants to continue to contribute to the “ecosystem”. Also mentioning that, “hopefully” he expects FTX will continue to find investments that will allow FTX’s creditors to be paid. He gave no further information on what will happen to the funds of those affected, whose case is already in the U.S. courts under a bankruptcy order.
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