The founder of cryptocurrency exchange FTX, Sam Bankman-Fried, says he doesn’t know exactly where billions of dollars from customers have gone. In an interview with The Wall Street Journal, Bankman-Fried said that in the early days of the trading platform, customer funds were deposited with cryptocurrency investor Alameda Research, which he also founded, because FTX itself did not have a bank account. A lot of that money is gone now. It may have been used for risky investments.
“The money was transferred to Alameda, and I can only speculate as to what happened next,” he told American Business. “It’s not like you give a dollar bill and then follow it from start to finish.” Bankman-Fried acknowledged that what FTX and Alameda did was wrong. But according to his own words, all his attention was on the first company, which meant that he paid little attention to the problems in that second company.
“I ask myself how I managed to make a series of mistakes that not only look ridiculous but are the kind of mistake that would have made me laugh at other people,” Bankman-Fried says. He denied being a fraud, as in previous interviews.
FTX was one of the largest cryptocurrency exchanges in the world until its collapse. Along with Alameda and several subsidiaries, FTX recently filed for bankruptcy. This happened after customers started claiming their balances from the crypto platform en masse, when there wasn’t enough money to pay everyone. Meanwhile, the company’s downfall is being investigated by US stock exchange prosecutors and regulators.
FTX’s new big guy, debris-cleaning veteran John Ray III, previously had a damning opinion about business operations under Bankman-Fried. Retrieving billions in client assets becomes difficult because FTX hardly makes decisions on paper and executives prefer to communicate via applications for scannable messages.
There has also been sharp criticism of the conflict of interest between Alameda and FTX. Alameda traded heavily on FTX, but was not subject to the same rules as other clients. In an interview with the Financial Times also published this weekend, Bankman-Fried admitted that Alameda was allowed to invest with much more credit than regular clients, which, if successful, would result in higher profits but also increase risk. Looking back, Bankman-Fried says he “absolutely” wished FTX Alameda had followed the same rules as other clients.
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