Disgraced founder of collapsed crypto exchange FTX set to testify to Congress next week

The former CEO of collapsed cryptocurrency exchange FTX said he is willing to testify under oath to lawmakers about what happened, but warned that he will be unable to answer all of their questions.

In a series of tweets, Sam Bankman-Fried replied to California Democrat Maxine Waters, the chair of the House Financial Services Committee, who had requested his presence at ongoing hearings into what caused the sudden bankruptcy of the cryptocurrency exchange he founded, FTX.

FTX succumbed last month to the cryptocurrency version of a bank run, where rumours of liquidity problems prompted customers to withdraw their funds from the exchange en masse, which revealed that FTX didn’t have those funds stored safely in the first place. The insolvency trustees now running the company’s unwinding have since called the cryptocurrency exchange’s management a “complete failure of corporate controls” and said that Bankman-Fried ran the company like his “personal fiefdom.”

After staying out of sight for weeks, Bankman-Fried began making a series of media appearances last week — interviews in which he acknowledged he made mistakes, but pushing back on the notion that he or the company had done anything illegal.

Based on those interviews, Waters said, “clear to us that the information you have thus far is sufficient for testimony.”

Bankman-Fried, who is colloquially known as SBF, says he is happy to participate at hearings on Tuesday, but said on Twitter “there is a limit to what I will be able to say, and I won’t be as helpful as I’d like,” because he does not have access to all of his data since he has no formal role at the company ever since it filed for bankruptcy a month ago.

WATCH | ‘King of crypto’ speaks:

Customer deposits vanished

SBF has become public enemy No. 1 for many in the crypto space since the debacle began, after it emerged that billions of dollars worth of funds that were supposed to be safe, were used as collateral for loans by his personal trading firm, Alameda. 

At least $1 billion US worth of customer deposits has completely vanished.

Critics have alleged that Bankman-Fried is being treated better than executives at other collapsed companies would be, noting that he was a major political donor in the most recent U.S. elections. According to non-partisan political watchdog OpenSecrets.org, Bankman-Friend donated $40 million US in the most recent electoral cycle, the vast majority of which went to Democrats but also a small amount to Republicans.

That’s enough to make him the sixth-largest individual political donor of 2022. 

Richard Smith, the CEO of investment analysis firm Finiac, says the treatment Bankman-Fried has received since the scandal began is “absurd” but is sadly predictable. “He bought relationships with powerful people,” he said in an interview with CBC News.

He says it’s ridiculous that Waters is claiming to want to hold him to account, given the infamous clip of her blowing him a kiss when he finished speaking to lawmakers about crypto regulation last year.

“It’s pretty clear who Sam Bankman-Fried is and what he was doing,” he said. “He was promising high returns with no risk and he was using the media and the regulators and the politicians to make something that seemed that was very risky to seem not risky at all.”

“But it was a fraud from day one.”

Dipping into customer funds

One of the accusations made against Bankman-Fried is that he arranged for Alameda to use customers’ assets in FTX to place bets in the market. Bankman-Fried has said in public interviews that he did not “knowingly” co-mingle customers’ assets with Alameda.

Bankman-Fried, who was once one of the richest people in the world on paper, now says he is getting by on a single credit card and likely has less than $100,000 to his name after FTX’s failure.

He has yet to appear on U.S. soil since the debacle began, appearing entirely remotely from the Bahamas, where he lives.

Waters has said that FTX’s collapse had “harmed over one million people,” and tweeted on Tuesday that if Bankman-Fried was not willing to testify that a subpoena was “definitely on the table.”