Cryptocurrency

Sam Bankman-Fried launches a Substack newsletter to defend himself

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Fallen crypto founder Sam Bankman-Fried on Thursday launched a newsletter on a popular platform offering an elaborate defense of his actions.

“I didn’t steal funds, and I certainly didn’t stash billions away,” Bankman-Fried said of how he ran FTX, his now-bankrupt cryptocurrency firm, which has been accused of misusing the money of millions of customers.

It was his biggest public defense since the Department of Justice filed eight counts of fraud, money laundering and other charges against Bankman-Fried last month, and the Securities and Exchange Commission and Commodity Futures Trading Commission filed related civil complaints. Collectively, they portrayed the executive as long using customer money at FTX to fund his own risky investments, personal purchases and campaign donations.

Bankman-Fried pleaded not guilty to the Justice Department’s charges, brought by the U.S. Attorney from the Southern District of New York. He is currently under house arrest at his parents’ home in Palo Alto, Calif., and set to go on trial on those charges later this year.

Bankman-Fried did not reply to a message seeking comment, nor did his attorney, Mark Cohen. A spokesman for the Southern District of New York declined to comment.

Bankman-Fried’s comments Thursday came via a post on a new account on Substack, the newsletter platform, that he created. The missive offered more details to back up the sentiments the 30-year-old former CEO made in a blitz of media interviews before he was arrested in December, appearances in which he also denied knowingly doing anything unethical or illegal.

Bankman-Fried wrote Thursday that FTX’s financial picture post-bankruptcy was less bleak than the company’s many legal and government critics have alleged.

For instance, “FTX US is fully solvent and always has been,” he wrote of the company’s American division, saying that it was “ridiculous that FTX US users haven’t been made whole and gotten their funds back yet.”

But while attorneys for the restructured FTX said in bankruptcy court Wednesday that they had recovered some $5 billion to help repay creditors, they say the process is not simple.

John J. Ray, the veteran bankruptcy executive brought in to try to clean up FTX, has said tracking down the swarm of accounts and subsidiaries amid a host of incomplete bookkeeping will take months. And as much as $8 billion can’t be accounted for, according to investigators.

Bankman-Fried says he was careless at FTX. Prosecutors say it’s fraud

As scores of customers await their money, which they have not been able to access, Bankman-Fried portrayed the losses as simply a matter of the up-and-down of markets and not any criminality.

“No funds were stolen. Alameda lost money due to a market crash it was not adequately hedged for,” he wrote, elaborating in detail on that company’s investment strategy and path to insolvency.

Though Alameda was a firm he helped found and was run by people to whom he remained close, Bankman-Fried sought to portray FTX as a discrete victim of Alameda’s troubles, similar to how a host of independent crypto companies have been affected by broader contagion in the market.

“FTX was impacted [by the Alameda challenges] as Voyager and others were earlier,” he wrote, referring to the crypto asset manager that went under last summer because of plummeting values at another crypto company, Terraform Labs.

But the SEC in its complaint called Bankman-Fried “the ultimate decision-maker” at Alameda. It also alleged that he made “undisclosed venture investments, lavish real estate purchases, and large political donations” with customer deposits to the FTX sister firm, drawing a picture of a company that was far from a helpless bystander in Alameda’s troubles.

To assist their case, prosecutors have the help of former Bankman-Fried associates Caroline Ellison and Gary Wang, both of whom have entered guilty pleas and are cooperating with the government.

Bankman-Fried gave a string of interviews after the bankruptcy, including a lengthy session with ABC’s George Stephanopoulos. He has also continued to tweet since being charged a month ago by prosecutors at the SDNY.

The narrative has been consistent throughout: He says he has little knowledge of, let alone control over, Alameda’s funds. And he would try to help people recover their money.

Thursday’s missive continued that theme. “I am dedicating nearly all of my personal assets to customers,” he wrote, without explaining how that would work or what it would mean.

But he also offered more financial detail than he had in previous statements. Bankman-Fried focused on how Alameda became insolvent and chose mainly to ignore the thrust of the allegations against him — that he illegally used FTX customers’ money to prop up the hedge fund.

Bankman-Fried wrote in the Substack post that he was seeking to set the record straight with testimony he was set to give the House Financial Services Committee on Dec. 13. “Unfortunately, the DOJ moved to arrest me the night before, preempting my testimony with an entirely different news cycle,” he wrote of his arrest in the Bahamas, where he was living at the time and where FTX was based.

While Bankman-Fried attempted Thursday to portray himself as a helpful figure, Ray has said that the mess is of the executive’s own doing.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information,” he said last month of how FTX and Alameda were run under Bankman-Fried.

Legal experts have repeatedly said the crypto executive’s press statements are a bad idea, providing fodder for prosecutors to re-create timelines and use comments against him.

It was unclear if the Substack has been launched as an ongoing newsletter or a one-time update, but Bankman-Fried concluded his post by noting that readers could expect more of his writings.

“I have a lot more to say,” he wrote. “But at least this is a start.”

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