Sam Bankman-Fried was scheduled to testify before the U.S. House of Representatives Committee on Financial Services. However, SBF was arrested in the Bahamas at the request of the U.S. government.
Forbes has released the full draft of Bankman-Fried’s planned testimony. A riveting 18-page read reveals the mindset of a man seriously in trouble. Here are the key takeaways.
FTX US Remains Solvent and Serious Offers for Financing
Bankman-Fried was set to testify that he is still aware of “serious offers for financing” amounting to billions of dollars that could potentially make FTX customers whole. However, this funding comes with a catch.
“As of today, I am still aware of billions of dollars of serious offers for financing, including signed LOIs: billions of dollars that could potentially make customers substantially whole. However, I believe that all of those are conditional on FTX being restarted as an exchange. I sincerely hope that all of the global teams working on FTX are seriously considering such a possibility because I believe it would drive a large amount of value to customers and creditors.”
Bankman-Fried had planned to add that he believes FTX US has been and remains solvent and “could pay off all of its customers in full tomorrow.” But, he adds, the Chapter 11 team has frozen the FTX US exchange, blocking customers’ access to their account information and funds.
John Ray III – Current CEO of FTX
With Bankman-Fried absent, FTX CEO John Ray, who previously oversaw restructuring efforts at corporations such as Enron, testified. He called FTX’s collapse and associated fraud “worse than Enron.”
The two are apparently not on speaking terms, with Ray allegedly ghosting Bankman-Fried.
“I have sent five emails to Mr. Ray. Mr. Ray has never responded, nor has he reached out to me to communicate in any other ways.”
SBF seems to have taken the ghosting personally as he continued to be highly critical of Ray, surprised by the inaction of the new CEO of FTX’s entities. “When John Ray became CEO of FTX US on November 10th, 2022, FTX US was still operational and still processing customer withdrawals. I intended and expected withdrawals to remain open, making all customers whole. I am surprised that did not happen. […] To my knowledge, FTX US is solvent and could make all customers whole. I’m surprised and saddened that it has not.”
Sullivan & Cromwell – FTX’s External Legal Counsel
Bankman-Fried was prepared to say he deeply regretted signing the papers that led to FTX starting the Chapter 11 bankruptcy process a few days after he said the exchange became “potentially insolvent”. According to his testimony, FTX US general counsel, Ryne Miller, put intense pressure on him and others to file for Chapter 11 bankruptcy as soon as possible.
“I have 19 pages of screenshots of Sullivan & Cromwell, Mr. Miller, and others I believe were influenced by them, all sent over a two day period, pressuring me to quickly file for Chapter 11. They range from adamant to mentally unbalanced. They also called many of my friends, coworkers, and family members, pressuring them to pressure me to file, some of whom were emotionally damaged by the pressure. Some of them came to me, crying.”
Bankman-Fried would go on to speculate that John Ray and Sullivan & Cromwell’s previous relationship from the Enron bankruptcy case influenced the speedy resolution of the Chapter 11 filings.
Ryne Miller – FTX’s General Counsel and former Partner for Sullivan & Cromwell
In his testimony, Bankman-Fried shares a text from Ryne Miller to FTX leadership in which he asks for $4 million in legal fees for Sullivan & Cromwell. “I’m in charge now,” Ryne said, according to a screenshot.
Bankman-Fried implies that Miller was in league with Sullivan & Cromwell to push him to file for Chapter 11, though he “received a large number of calls from prospective investors.” Miller, he planned to say, told him “that a capital raise was ‘a 0% likelihood…’ And in response to my desire to keep FTX active, Mr. Miller said ‘There’s nothing to save Sam”.
Binance and Binance CEO Changpeng “CZ” Zhao
It’s no secret that there is no love lost between Binance CEO Changpeng “CZ” Zhao and Bankman-Fried. The ex-FTX CEO had planned to name and shame CZ and Binance, blaming a “month of sustained negative PR on FTX.”
As FTX scrambled for options, Bankman-Fried signed a letter of intent for Binance to acquire his company, which prevented FTX from courting other potential investors. “During that time, I received serious expressions of interest from multiple potential investors who represented billions in the capital that could have gone to customers,” Bankman-Fried wrote in his prepared remarks. “I was inhibited in responding by the LOI.”
In the end, Bankman-Fried said he learned via Twitter that Binance was backing out of the deal anyway. “As best I can tell, Binance never intended to go through with the deal.”
A ‘historical accounting quirk’
Bankman-Fried has issued several explanations for why he believes FTX imploded, which largely centers around the failure of multiple internal controls. But perhaps the most bizarre from his prepared remarks was that FTX’s dashboard did not accurately show the size of the holdings of Alameda Research, its sister trading arm, something he blamed on a “historical accounting quirk,” without offering more details.
“I now believe that Alameda’s position was over twice as large as what was displayed,” his prepared remarks state. “My periodic assessments of the riskiness of our positions were often based on the dashboard’s numbers.”
Party Culture and The “Patch”
SBF dedicated the final part of his testimony to addressing reports of hard partying at FTX and his drug usage. His testimony states that he has never been drunk in his life and has been on Emsam (an anti-depressant) for roughly a decade.
In a truly sobering statement, Bankman-Fried ended his testimony with
“The last few months have been difficult enough for everyone that it feels unremarkable to me, in comparison, that I need to put on the official Congressional Record that I am, and for most of my adult life have been, sad.”