FTX founder Sam Bankman-Fried said he cannot explain what happened to the billions of dollars that customers of his failed crypto exchange sent to the bank accounts of his trading firm, Alameda Research.

Bankman-Fried also said he could not rule out the possibility that money deposited by FTX customers who were told their money was theirs alone was in fact not later loaned to Almeda.

In an interview with the Wall Street Journal, Bankman-Fried distanced himself from Almeda, saying that he withdrew from the management of the company and had little insight into its activities, despite owning a 90% stake in it.

He also said in the interview that there were FTX customers who made separations by transferring funds to bank accounts controlled by Almeda, with the intention that the money would be used to finance their FTX accounts. This was a legacy of the early days when FTX did not have its own bank account. Over time, FTX clients have deposited more than $5 billion in these Alameda accounts, he said. Now all that money is gone.

“The funds were sent to Almada… and I can only guess what happened after that,” Bankman-Fried told the Journal.

“Dollars are interchangeable. So it’s not like there’s a dollar bill here that you can follow from beginning to end. What you get is more like a collection of, you know, asset classes in different forms,” ​​he said.

Bankman-Fried’s words imply that the FTX client funds that flowed into Almeda’s bank accounts may have been registered in two places – both as FTX client funds and as part of Almeda’s trading positions. Such double counting would have left a huge hole in FTX and Almada’s balance sheets, with assets that weren’t actually there. Bankman-Fried denied that double counting affected FTX’s financial position – but acknowledged that it was not certain that Alameda’s debts were fully recorded.

“There are many ways to do this responsibly,” he said. “Obviously what we did was not one of them.”

Until its demise last month, FTX was one of the largest crypto exchanges in the world and 30-year-old Bankman-Fried one of the crypto industry’s biggest stars. Cryptocurrency supporters from around the world have deposited money into FTX so they can buy and sell digital assets. Almeda was also a buyer and seller in FTX – and was one of the largest participants in the exchange.

Internal system is damaged

FTX filed for bankruptcy on Nov. 11, unable to satisfy a wave of customer withdrawals. Almeda, which made a series of large and unsuccessful trading operations, also went bankrupt.

The fate of the missing billions is central to the bankruptcy proceedings, but locating them will be complicated. The new CEO at FTX said that the company’s financial reports cannot be trusted and described Bankman-Fried and his colleagues as “perhaps not to be trusted.” He said that FTX operated software to hide the improper use of customer funds.

Bankman-Fried says he did not understand the scale of Alameda’s trading in FTX because of a faulty internal system. A dashboard that FTX executives operated to monitor the bets of large traders did not properly alert clients to funds being sent to Alameda’s bank accounts, an oversight that ultimately obscured the sheer scale and risk of Alameda’s trading operations, he said.

Bankman-Fried said he was too overwhelmed with work as FTX manager and too distracted by other projects to notice the risks accumulating at the trading company he founded in 2017. “I didn’t have any

He did not rule out the possibility that FTX violated the terms of service

“There are enough brain circuits left to understand everything that happens at Almeda even if I wanted to,” he said.

Bankman-Fried repeated similar things in a blitz of interviews, denying that he committed fraudulent acts or misused clients’ funds on purpose.

Still, in a conversation with the Journal, he did not rule out the possibility that FTX violated its terms of service.

FTX allowed customers to borrow money to make larger trades than they could do with their own money alone, a high-risk practice known as margin trading. His funds came from a pool that was filled by other customers who agreed to be lenders.

But only a few customers agreed to participate in these marginal loans, as for the others, the 62 pages of FTX’s terms of service state that the digital assets in any user’s account belong to the user and not to FTX – a clause that was supposed to prevent them from lending to a third party that puts them at risk.

“I am not aware of any violation of the terms of use,” Bankman-Fried said. “I don’t know every line in the terms of use. I can’t say with confidence that there weren’t any.” [הפרות] Such, but I am not aware of any.”

The interview with Bankman-Fried was conducted in Albany, the prestigious gated community where he lives in the Bahamas, in an empty condominium that was home to a group of FTX employees until they left the island nation after the company’s collapse. Bankman-Fried said he was hiding to avoid paparazzi, some of whom managed to sneak into Albany in recent days to film a professional golf tournament.

“I more or less don’t leave the apartment,” he said. “Most of my close friends and colleagues don’t – I think they don’t want to talk to me these days.”

As a “Yoram” who graduated from physics at MIT, as Bankman-Fried describes himself, he gained fame when he became a crypto billionaire. He recruited celebrities such as football star Tom Brady and supermodel Gisele Bindchen to promote FTX. Now, he says fame may have clouded his judgment.

“It’s not like I even particularly enjoyed it,” he said. “It opened up a lot of opportunities and doors that seemed very interesting to explore. And my mind wandered and I became really distracted.”

Bankman-Fried’s critics in the crypto community questioned the idea that someone with his intelligence could make a mistake and lose billions of dollars, suggesting that he knowingly took the money.

Bankman-Fried says it was not a theft.

“I ask myself how I made a series of mistakes that look — they don’t just look stupid,” he said. “They seem like the kind of mistakes I can see myself making fun of if someone else made them.”

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