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Sam Bankman-Fried responds to fraud allegations: 'I didn't steal funds'

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Sam Bankman-Fried, the disgraced cryptocurrency executive, on Thursday gave his first detailed response to the criminal charges filed against him last month, arguing that the millions of customers of his failed exchange, FTX, could still get their money from return.

In a statement posted on Substack, Mr. Bankman-Fried said “a very substantial recovery potentially remains available”.

“I have not stolen funds and I certainly have not hoarded billions,” he wrote. “Almost all of my assets were and still are usable to support FTX customers.”

His statement came a day after lawyers who oversaw FTX’s bankruptcy told the court they had recovered at least $5 billion in funds. Mr. Bankman-Fried cited that announcement to try to bolster his case that FTX clients can still be “substantially whole.” It was unclear whether he had reviewed his statement with his legal team before publishing it.

FTX filed for bankruptcy in November after a run on customer deposits exposed an $8 billion shortfall in its accounts. Mr. Bankman-Fried, 30, was arrested last month at his home in the Bahamas, where FTX was based, and quickly extradited to the United States. Federal prosecutors in Manhattan have charged him with fraud, money laundering and campaign finance violations.

Authorities claim that Mr. Bankman-Fried embezzled billions of dollars in deposits from FTX clients and used the funds to buy luxury real estate, invest in other companies, make political contributions and fund cryptocurrency trading at Alameda Research, the hedge fund he also owned. .

The FTX founder was released last month on $250 million bail under strict conditions that require him to remain confined to his parents’ home in Palo Alto, California. In a brief New York court appearance last week, he pleaded not guilty to the charges.

A spokesman for Damian Williams, the attorney for the Southern District of New York who is suing Bankman-Fried, declined to comment.

A spokesman for Bankman-Fried and his legal team declined to comment.

Bankman-Fried’s statement on Thursday reiterates a narrative he has presented before – and which US prosecutors, regulators and industry experts have categorically rejected. The post featured a detailed timeline of Alameda’s financial situation, which was closely tied to FTX, arguing that the company lost money as a result of a market downturn it was unprepared for.

Bankman-Fried’s statement also blamed FTX’s failure in part on an attack by its biggest rival, Binance.

“No money was stolen,” he wrote.

But even in describing Alameda’s finances, Mr. Bankman-Fried also stated that he has not run the company “in recent years” and has not had access to all of its financial information. Regulators and prosecutors argued that he was, in fact, intimately involved in running Alameda and orchestrated a system that allowed the company to borrow essentially an unlimited amount of money from the deposit pool of FTX customers.

His statement did not address guilty pleas by two of his former executives, Caroline Ellison and Gary Wang, both of whom cooperated with prosecutors. Mrs. Ellison, who once dated Mr. Bankman-Fried, was the head of Alameda when the company went bankrupt, and Mr. Wang founded FTX with Mr. Bankman-Fried.

On Wednesday, an FTX bankruptcy attorney told a federal judge that the exchange recovered more than $5 billion in cash and crypto assets — considerably more than the company had previously said it had on hand. The announcement raised hopes that FTX could return some money to its millions of creditors and customers around the world.

Andrew Dietderich, an attorney at Sullivan & Cromwell, also told the judge overseeing the FTX bankruptcy in Delaware that the legal team identified more than nine million customer accounts on the cryptocurrency exchange.

In an email after the bankruptcy hearing, Dietderich said that of the $5 billion in assets recovered, approximately $1.7 billion was in cash.

He said the newly recovered assets did not include about $20 million in cash and $484 million in stock in online trading company Robinhood, which federal prosecutors seized from a separate company that Bankman-Fried set up in Antigua. . He also said that FTX’s new management believes that Robinhood’s shares and the seized money should be distributed to FTX’s creditors.

FTX is also weighing whether it can sell about $4.6 billion worth of investments the company has made in other businesses, primarily cryptocurrency companies.

In his statement on Thursday, Mr. Bankman-Fried said that he had already offered “to contribute almost all of my personal shares in Robinhood to clients” if FTX would agree to help him pay his legal bills. He recently filed a lawsuit in bankruptcy court arguing that these shares were his personal property and that he needed to sell some of them to pay his lawyers.

Bankman-Fried also blames Sullivan & Cromwell, who had done legal work for FTX before the stock market crash, for pressuring him to put the company into bankruptcy and let a restructuring lawyer, John Jay Ray III, take over.

In his statement, Mr. Bankman-Fried included excerpts of what appear to be FTX financial statements and balance sheets. Mr. Ray, in a bankruptcy filing, sharply criticized FTX’s former management and said there was “a complete failure of corporate control” and that the company’s financial statements were unreliable.

Moira Penza, a former federal prosecutor now in private practice, said Bankman-Fried’s role was a gift to prosecutors and certainly created headaches for her legal team.

“The most powerful evidence a prosecutor can have is the defendant’s own words, and Bankman-Fried is giving the government a gift,” Penza said. “If I was prosecuting the case, I would want him to keep talking, and if I were defending him, I would be telling him to shut up.”

After the collapse of FTX, Mr. Bankman-Fried gave a series of interviews about the implosion. But since he was released on bail last month, he’s been relatively quiet, except for one some tweets, yet. He’s had a handful of visitors at his parents’ home, including author Michael Lewis, who is writing a book about him; YouTube crypto personality Tiffany Fong; and a reporter for the online publication Puck.

In his post, Bankman-Fried said he expected to respond in detail to the allegations against him much sooner, starting with testimony he planned to deliver to the House Financial Services Committee on Dec. 13.

“Unfortunately, the DOJ decided to arrest me the night before, preempting my testimony with an entirely different news cycle,” he wrote, referring to the Justice Department.

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