If you are curious about what would someone who crashed two multi-billion dollar companies in one of the biggest financial frauds in American history say in order to lock in a negligence case instead of fraud, you may want to look at SBF’s freshly launched Substack.
The former CEO of FTX started a blog titled “SBF’s Substack” on Thursday from his parents’ home in Palo Alto, California, where he currently awaits trial under house arrest after being released on a $250 million bail bond on December 22. In his first post, SBF wrote a lengthy explanation of why his exchange collapsed and reiterated that FTX collapse was due to the market downturn and subsequent bank run.
“I believe that, had FTX International been given a few weeks, it could likely have utilized its illiquid assets and equity to raise enough financing to make customers substantially whole,” Bankman-Fried wrote.
Will we ever know for sure if Sam is just plain delusional or is actually consistent in building his defense line to land a negligence case instead of a conspiracy? Time has a way of bringing clarity. But for now, it looks like his legal team plans to raise the defense that FTX was not a deliberate years-long fraud but a perfect storm of market turmoil and poor risk management in the absence of clear regulation.
In his blog post, Sam Bankman-Fried made an attempt to defend his actions and laid out his vision for FTX collapse. According to him:
- FTX US is fully solvent and always has been
- He hasn’t run Alameda for the past few years
- Alameda’s insolvency stemmed from a series of market crashes, insufficient hedges, and CZ’s actions
- The law firm Sullivan & Crowell has a conflict of interest in the FTX bankruptcy case and threatened him into naming John J. Ray as FTX’s new CEO
- Recovery would be possible if it wasn’t for S&C pressuring FTX into Chapter 11 filing
“I didn’t steal funds, and I certainly didn’t stash billions away. Nearly all of my assets were and still are utilizable to backstop FTX customers. I have, for instance, offered to contribute nearly all of my personal shares in Robinhood to customers–or 100%, if the Chapter 11 team would honor my D&O legal expense indemnification,” SBF added.
For context, approximately $450 million worth of Robinhood shares were seized by the U.S. Justice Dept on January 5. The assets belonged to the entity that is 90% owned by Bankman-Fried, and 10% by Gary Wang, FTX co-founder and CTO, who pleaded guilty to fraud charges and is now cooperating with prosecutors.
In a court filing, Bankman-Fried’s lawyers argued that he needed the shares to fund his legal bills. “The withholding of costs necessary to an adequate criminal defense can constitute irreparable harm,” the document reads.
The disgraced CEO pleaded not guilty to all eight charges in the FTX fraud case and is set to face trial on October 2. If convicted, he can face up to 115 years in prison, and with every day this seems more likely, as the three members of his inner circle — Alameda’s CEO Caroline Ellison, FTX CEO Gary Wang, and FTX engineering chief Nishad Singh — agreed to cooperate with prosecutors, which can help build the case against SBF.
“I’ve been, regrettably, slow to respond to public misperceptions and material misstatements. It took me some time to piece together what I could–I don’t have access to much of the relevant data, much of which is for a company (Alameda) I wasn’t running at the time,” Bankman-Fried wrote at the end of the post. “I have a lot more to say–about why Alameda failed to hedge, what happened with FTX US, what led to the Chapter 11 process, S&C, and more. But at least this is a start.”