Sam Bankman-Fried Didn’t Know He Was Violating Client Assets Terms

According to an interview published by Wall Street Journal on Saturday, FTX founder Sam Bankman-Fried said he couldn’t explain what happened to billions of dollars given to his trading business, Alameda Research, by users of his bankrupt cryptocurrency exchange.

Bankman-Fried distanced himself from Alameda in an interview with Wall Street Journal, saying he had stepped back from running the firm and had little insight into its operations despite owning 90% of it.

The former CEO of FTX “can only speculate” on what happened to billions of dollars wired to Alameda Research, FTX’s sister trading firm.

“They were wired to Alameda, and…I can only speculate about what happened after that,” Bankman-Fried told the Journal.

Bankman-Fried claimed he was too busy as FTX’s CEO and too distracted by other projects to notice the risks brewing in the trading firm he founded in 2017.

“I didn’t have enough brain cycles left to understand everything going on at Alameda if I wanted to,” he said.

Customers might borrow from FTX to execute larger transactions than they could with their own cash, a high-risk technique known as margin trading. The money they borrowed came from a pool of money put together by other consumers who signed up to be lenders.

However, only a subset of clients is optional to participate in this margin lending. For the rest of the customers, FTX’s 62-page terms-of-service document states that digital assets in a user’s account belong to that user, not FTX. Talking about this issue, SBF denied that he did not know there was a clause like this:

“I don’t know of a violation of the terms of use. I don’t know every line of the terms of use. I can’t confidently say there wasn’t, but I don’t know of one.”

Bankman-Fried’s critics in the crypto community have questioned how someone of his intelligence could have blundered into losing billions of dollars, implying that he took the money knowingly. Responding to this doubt, SBF said:

“I ask myself a lot how I made a series of mistakes that seem—they don’t just seem dumb. They seem to like the type of mistakes I could see myself having ridiculated someone else for having made.”

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