“I would like to start by formally stating, under oath: I f—ed up.”
That was how Sam Bankman-Fried, co-founder and chief executive of now-bankrupt crypto platform FTX Trading Ltd., was planning to open testimony he had agreed to give to a House Financial Services Committee hearing on Tuesday, before his arrest on fraud charges late Monday.
The 18-page-long prepared testimony, which the Wall Street Journal obtained, took firm aim at current FTX management, as well as rival exchange Binance, which has itself become the subject of a Justice Department investigation, according to a Reuters report Monday.
Bankman-Fried, commonly known as SBF, took issue with the new FTX chief executive, the restructuring expert John Ray; law firm Sullivan & Cromwell; and other longtime FTX executives for pushing the company to file for Chapter 11 bankruptcy protection, a decision Bankman-Fried now says was a mistake.
“I deeply regret giving in to pressure to sign forms that precipitated the chapter 11 filing just a few days after FTX International became potentially insolvent,” the testimony reads. “Among other things, the chapter 11 team was thrust into a very difficult situation, and I worry that they were given very misleading information by a few members of the FTX US team when they joined.”
FTX and hundreds of related entities filed for bankruptcy in November, after collapsing in spectacular fashion. The Securities and Exchange Commission on Tuesday charged SBF with securities fraud, for commingling FTX customers’ funds with those of Alameda Research LLC, a private crypto hedge fund run by him.
The Justice Department is unsealing an indictment on Tuesday, and investigations as to other securities-law violations and into other entities and persons relating to the alleged misconduct are ongoing, the SEC said.
Among his many quibbles, SBF said he has reached out to Ray, who helped handle the Enron bankruptcy, in five emails, to which he has, he said, received no response.
In one, he said he told Ray, “I have potentially pertinent information concerning future opportunities and financing for FTX and its creditors. I also believe that I have relevant financial information about FTX US, and further that I have potentially relevant regulatory information concerning FTX. I would love to talk to you, whether it’s via email or phone, and to work constructively with you and the chapter 11 team to do what’s best for customers.”
SBF reiterated his long-held stance that he is prioritizing recovering and refunding the platform’s customers, and said he believes FTX US “has been and remains solvent.”
Other critiques include: that Ray and his team “significantly overstepped its mandate” and lack “the legal authority to lead the global restructuring and financing effort.”
That’s because the team does not control the core entity that runs FTX International, which is named FTX Digital Markets Ltd. and is based in the Bahamas and regulated there.
Sullivan & Cromwell, and Ryne Miller, general counsel for FTX US and a former partner at the law firm, pressured SBF into filing for Chapter 11, the testimony reads. SBF has 19 pages of screenshots purporting to show the firm, Miller and others urging him to quickly file.
“They range from adamant to mentally unbalanced,” he said, as friends and co-workers were called to help emotionally pressure SBF into action.
“It was only later that I was informed that it was very unusual for such a significant filing to be made so quickly,” he said.
Just minutes after clicking on a DocuSign link nominating Ray as CEO of various entities, SBF says he received a funding offer for billions of dollars to make customers whole. He instructed his counsel to rescind the filing but was told it was too late.
SBF saves special criticism for Binance, however, and its CEO, Changpeng “CZ” Zhao. Zhao and SBF have been engaged in a war of words in recent weeks, after the former said he would acquire FTX but then backed out after a look at the financials. Zhao has warned SBF to stop tweeting, telling him “the more damage you do now, the more jail time.”
SBF alleged that FTX suffered “a month of sustained negative PR” that was “largely driven by Binance.” That was before Zhao tweeted his intention to sell his holdings in FTX’s token. called FTT. Much of Alameda’s balance sheet was made up of FTT, which immediately lost most of its value, precipitating the current crisis.
“There is much more to say about Binance, its role in the cryptocurrencyecosystem, and its relationship with FTX, but this is neither the place nor the time for it,” the testimony reads.