Sam Bankman-Fried, a co-founder of FTX, said that Binance CEO Changpeng “CZ” Zhao orchestrated a months-long campaign to bring down FTX in a post on Substack on Thursday (January 12, 2023) morning, in which he disputed accusations that he had stolen billions of dollars in user cash.
It is Bankman-first Fried’s substantive response to claims made by the federal government that he masterminded a $8 billion fraud that wiped out his $32 billion crypto empire. Bankman-Fried was released on a $250 million recognizance bail after entering a not guilty plea to eight federal counts, including fraud and money laundering. His trial will begin in October. Bankman-Fried is the subject of complaints from the Securities and Exchange Commission and the Commodity Futures Trading Commission as well.
His post provides his perspective on the collapse of FTX and his hedge fund Alameda Research, and includes purported FTX and Alameda financial metrics, caveated as “JUST AN ESTIMATE.”
For instance, Bankman-Fried claims to have put the value of Alameda’s entire net assets at $99 billion by the beginning of 2022. He thought the net assets of his hedge firm had dropped to $10 billion by October. He pinned the collapse on a broader market downturn, even comparing his FTT token’s performance to that of Tesla, bitcoin and the Invesco QQQ, an ETF that tracks the Nasdaq 100.
Bankruptcy lawyers, federal prosecutors and regulators have contradicted many of the claims Bankman-Fried made in his post.
Regulators and prosecutors allege that neither FTX nor Alameda were wholly legitimate businesses but were instruments of Bankman-Fried’s fraud.
FTX’s restructuring officers have said the businesses faced significant and inexplicable cash shortfalls after FTX filed for bankruptcy in November.
The case against Bankman-Fried was constructed with the assistance of his longtime executives Caroline Ellison and Zixiao “Gary” Wang, both of whom pleaded guilty to charges of fraud. Bankman-Fried’s post did not acknowledge their cooperation with federal probes.
In his post, Bankman-Fried also noted that other crypto firms have been “blown out.” He made no mention of the purported harm that the demise of FTX is said to have caused to three of those companies: BlockFi, Genesis, and Gemini.
Many of his claims were ones he’s made before, including that FTX US remained solvent, that Alameda’s liquidity crisis was not due to misconduct but because of broader market turbulence, and that FTX International and Alameda were wholly legitimate, profitable businesses.
The former FTX CEO also pointed to a Nov. 6 tweet from Binance’s Zhao as the culmination of an “extremely effective months-long PR campaign against FTX.”
Zhao has denied those claims. “FTX killed themselves […] because they stole billions of dollars,” the Binance CEO tweeted in December.
At the end of the post, Bankman-Fried doubled down. “All of which is to say: no funds were stolen,” the 30-year-old wrote.
