FTX Boss’s Ignorance Defense Strategy Doesn’t Hold Up

© via REUTERS — Sam Bankman-Fried continues to claim he was unaware of FTX’s wrongdoings, but no one seems fooled.

In an interview with New York Times columnist Andrew Ross Sorkin on Wednesday, the founder of the crashing cryptocurrency exchange relied on arguments that boil down to admissions of ignorance or a lack of understanding when asked how his exchange — which told clients their assets would be held separately from its own funds — ended up lending billions of dollars to hedge fund Alameda Research.

Alameda was also majority owned and controlled by Bankman-Fried until it was included along with 130 other FTX subsidiaries in its Chapter 11 bankruptcy filing. It had borrowed heavily from FTX over the summer to cover losses resulting from the collapse of the Terra/Luna stablecoin network. According to data from Arkham Intelligence, it withdrew $204 million from the exchange just days before FTX collapsed. The gap between their combined assets and liabilities is widely estimated at more than $8 billion, suggesting that the majority of customer deposits – which were not protected by any insurance scheme – will not be recovered.

“I never tried to defraud anyone,” Bankman-Fried said, later adding that “I didn’t knowingly mix funds” and “I don’t know of any times I lied. “

Regarding Alameda, he argued, “I wasn’t running Alameda, I didn’t know exactly what was going on. I didn’t know the size of their position.”

However, most observers of the FTX implosion were not fooled.

“Ignorance of the law is no defence. And neither is incompetence,” tweeted Frances Coppola, a veteran UK-based financial commentator.

Dan Davies of Frontline Analysts was even more scathing.

“When you tell people their money is segregated and it isn’t, when you use one company’s bank account and present it as another, that’s fraud!” he argued. “Fraud is not a ‘subjunctive crime’. Even if you get the money back, even if the client funds are ultimately protected, the fraud still happened.”

Ross Gerber, CEO of the San Francisco-based Gerber Kawasaki wealth management firm, had tuned in, like thousands of others, hoping to hear more than the typically long and evasive answers Bankman-Fried gave. to simple and straightforward questions about clients’ missing funds. He quickly gave up.

“Had to turn this off. Call me when it’s orange,” Gerber tweeted halfway through the interview.

However, “SBF” could still count on pockets of support from global audiences.

“Call me crazy, but I think SBF was telling the truth,” tweeted Bill Ackman, the billionaire investor behind Pershing Square (NYSE:).

Ackman is a late convert to cryptocurrencies, having invested in projects such as DIMO, Goldfinch Finance and ORIGYNTech in recent months. He asserted in a blog after FTX’s collapse that “crypto is here to stay, and with proper oversight and regulation, has the potential to greatly benefit society and grow the global economy.”

By Geoffrey Smith

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