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Former FTX CEO Sam Bankman-Fried comes face to face with dispossessed customers at a New York Times event, European central bankers question bitcoin’s longevity and Kraken lays off almost a third of its staff.
Following his resignation and FTX’s bankruptcy filing earlier this month, former CEO Sam Bankman-Fried has publicly claimed that he “did not try to commit fraud” and that he believes FTX US is “fully solvent”.
Speaking by video from the Bahamas at a New York Times DealBook Summit, Bankman-Fried faced questions from FTX customers who wrote in about their loss of funds.
“SBF stole $2m from me,” said one customer, referring to Bankman-Fried’s nickname. “Can you please ask SBF why he decided to steal my life savings?
“Please ask him whether he thinks what happened was fraud.”
In response, Bankman-Fried said he is “deeply sorry about what happened”, and that he attributes FTX’s collapse not to fraud but to a “massive failure of oversight on my part.”
“Whatever happened, why it happened, I had a duty to our stakeholders, our customers, our investors, the regulators of the world, to do right by them,” he said.
“Clearly, I didn’t do a good job of that,” he added, but “I didn’t ever try to commit fraud on anyone.”
Ahead of the DealBook Summit, the event organisers said they had “repeatedly” received similar letters from FTX customers alleging fraud.
In addition to rejecting those allegations, Bankman-Fried claimed that FTX’s US subsidiary is not bankrupt at all.
“The US-regulated platform with American users, to my knowledge — that’s fully solvent, that’s fully funded,” he said.
“I believe that withdrawals could be opened up today and everyone could be made whole. None of these problems plagued the US platform.”
After the event, Bankman-Fried clarified on Twitter that FTX US “custodied its own assets”, and therefore is unlikely to have any solvency or liquidity issues.
“At the very least, it was true prior to [the bankruptcy] filing — to the best of my knowledge — and I was fully expecting withdrawals to remain open,” he said.
Last month, as reported by VIXIO, Bankman-Fried had insisted up to his resignation and FTX’s bankruptcy filing that FTX US was solvent, due to strict separation of funds from the rest of FTX Group. Since then, however, withdrawals from FTX US have been disabled.
Bankman-Fried said his lawyers had advised him not to speak in public, but he wanted to appear at the DealBook Summit because he has a “duty to explain what happened”.
One day later, Bankman-Fried also appeared on Good Morning America with ABC News host George Stephanopoulos.
As noted in a previous Week In Crypto, FTX is believed to owe up to $8bn to over 1m customers worldwide, but he has not been charged with any crime or sued by any federal regulators.
Yellen calls FTX a “Lehman moment”
In 2022, as VIXIO has noted previously, Bankman-Fried donated over $40m to Democrat candidates and committees ahead of the midterms and other elections.
However, it has since emerged that FTX executives collectively also donated over $20m to Republican candidates during the same period.
The vast majority of the candidates that received funding from these sources were incumbents, highlighting Bankman-Fried’s cosy relationship with lawmakers on both sides of the aisle.
After Bankman-Fried’s appearance at the DealBook Summit, next on the roster of guests was Janet Yellen, secretary of the US Treasury.
Yellen, who said she does not personally know Bankman-Fried and has never met him, went described FTX’s collapse as a “Lehman moment” for the crypto industry.
“Crypto is big enough that we’ve had substantial harm of investors and particularly people who aren’t very well informed about the risks that they’re undertaking, and that’s a very bad thing,” she said.
“I think everything we’ve lived through over the last couple of weeks, but earlier as well, says this is an industry that really needs to have adequate regulation, and it doesn’t.”
Bitcoin’s ‘last gasp’
Over in the EU, lawmakers and officials have also been digesting the FTX fallout this week, with some strong views being aired by the European Central Bank (ECB).
In a new blog post entitled "Bitcoin’s last stand", two top payments officials at the ECB shared their predictions for where they think the world’s largest crypto-asset is headed next.
They argued that bitcoin’s long stint around the $20,000 price mark this year will be the last chapter before the asset’s real bust in 2023 and beyond.
“[Bitcoin’s time at $20,000] is an artificially induced last gasp before the road to irrelevance,” wrote Ulrich Bindseil and Jürgen Schaaf.
“This was already foreseeable before FTX went bust and sent the bitcoin price to well below $16,000.”
Bindseil and Schaaf went on to say that bitcoin is a speculative bubble, an asset with no intrinsic value and a means of payment that is “rarely” used for legal transactions.
They praised the EU for agreeing to the Markets in Crypto-Assets Regulation (MICA) this year, and they chided the US for being “slow” to agree on coherent federal rules.
However, most significantly, Bindseil and Schaaf appeared to suggest that due its lack of value, bitcoin should ideally be unregulated — although they did not explicitly call for it to be made illegal.
“Since bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimised,” they said.
“Similarly, the financial industry should be wary of the long-term damage of promoting bitcoin investments. The reputational damage to the entire industry could be enormous.”
Bindseil, who has been director general of market infrastructure and payments at the ECB since November 2019, is a vocal supporter of the digital euro.
He is also the lead author of two ECB papers on central bank digital currency (CBDC) published in 2020 and 2021 respectively.
Cracks appear in Kraken’s workforce
Meanwhile at Kraken, the world’s fourth largest crypto exchange, outgoing co-founder and CEO Jesse Powell has announced significant layoffs to “weather the crypto winter”.
This Wednesday (November 30), Powell said that Kraken will reduce its global workforce by approximately 1,100 people, or 30 percent, in order to adapt to current market conditions.
Over the past few years, Kraken tripled the size of its staff due to the sudden influx of exchange users during the crypto bull market of 2020 and 2021. Following the layoffs, Kraken’s total staff count will return to where it was 12 months ago.
“Since the start of this year, macroeconomic and geopolitical factors have weighed on financial markets,” said Powell. “This resulted in significantly lower trading volumes and fewer client sign-ups.
“We responded by slowing hiring efforts and avoiding large marketing commitments. Unfortunately, negative influences on the financial markets have continued and we have exhausted preferable options for bringing costs in line with demand.”
