Sam Bankman Fried breaks silence on Substack trying to explain he is innocent of all charges against him.

In December, federal prosecutors in Manhattan charged Bankman-Fried with stealing billions of dollars from FTX customers to settle debts for his crypto-focused hedge fund, Alameda Research, buy expensive real estate, and donate millions of dollars to US political campaigns.

While awaiting trial which begins October 2nd, Bankman-Fried is being held under house arrest at his parents’ home in Palo Alto, California. He continues to maintain his innocence of all the charges against him.  It is rare and unusual for a criminal defendant to speak out so fluently before a court date.

Sam Bank Frieds statements contradict US prosecutors’ allegations that FTX customers’ money were being stolen to fix gaps at Alameda in breach of FTX’s terms of service terms.

Here some highlights of what SBK writes on Substack, a popular open free speech forum naming it the “FTX Pre-mortem Overview”

“In mid-November, FTX International became effectively insolvent.   The FTX saga, at the end of the day, is somewhere between that of Voyager and Celsius.

Three things combined together to cause the implosion:

1. a) Over the course of 2021, Alameda’s balance sheet grew to roughly $100b of Net Asset Value, $8b of net borrowing (leverage), and $7b of liquidity on hand.
2. b) Alameda failed to sufficiently hedge its market exposure. Over the course of 2022, a series of large broad market crashes came—in stocks and in crypto—leading to a ~80% decrease in the market value of its assets.
3. c) In November 2022, an extreme, quick, targeted crash precipitated by the CEO of Binance made Alameda insolvent.

And then Alameda’s contagion spread to FTX and other places, similarly to how Three Arrows etc. ultimately impacted Voyager, Genesis, Celsius, BlockFi, Gemini, and others.

Despite this, a very substantial recovery remains potentially available.   FTX US remains fully solvent and should be able to return all customers’ funds.   FTX International has many billions of dollars of assets, and I am dedicating nearly all of my personal assets to customers.

I didn’t steal funds, and I certainly didn’t stash billions away.   Nearly all of my assets were and still are utilizable to backstop FTX customers.   I have, for instance, offered to contribute nearly all of my personal shares in Robinhood to customers—or 100%, if the Chapter 11 team would honor my D&O legal expense indemnification.

FTX International and Alameda were both legitimately and independently profitable businesses in 2021, each making billions.

And then Alameda lost about 80 percent of its assets’ value over the course of 2022, due to a series of market crashes—as did Three Arrows Capital (3AC) and other crypto firms last year—and after that its assets fell even more from a targeted attack.   FTX was impacted by Alameda’s decline, as Voyager and others were earlier by 3AC and others.

Note that, in many places here, I’m still forced to make approximations.   Many of my personal passwords are still being held by the Chapter 11 team—to say nothing about data.   If the Chapter 11 team wants to add their data to the conversation, I would welcome that.

Also—I haven’t run Alameda for the past few years.

So much of this is pieced together post-hoc, coming from models and approximations, generally based on data that I had prior to resigning as CEO and modeling and estimations based on that data.

Despite its insolvency, and despite processing $5 Billion of withdrawals over its last few days of operation, FTX International retains significant assets—$8b of assets of varying liquidity as of when Mr. Ray took over.

In addition to that, there were numerous potential funding offers—including signed LOIs post chapter 11 filing totaling over $4b.   I believe that, had FTX International been given a few weeks, it could likely have utilized its illiquid assets and equity to raise enough financing to make customers substantially whole.

Since S&C pressured FTX into Chapter 11 filings, however, I worry that those pathways may have been abandoned.   Even now, I believe that if FTX International were to reboot, there would be a real possibility of customers being made substantially whole.

Even then, I think it’s likely that FTX could have made all customers whole if a concerted effort had been made to raise liquidity.

There were billions of dollars of funding offers when Mr. Ray took over, and more than $4 Billion came in after.

If FTX had been given a few weeks to raise the necessary liquidity, I believe it would have been able to make customers substantially whole. I didn’t realize at the time that Sullivan & Cromwell–via pressure to instate Mr. Ray and file Chapter 11, including for solvent companies like FTX US—would potentially quash those efforts. I still think that, if FTX International were to reboot today, there would be a real possibility of making customers substantially whole. And even without that, there are significant assets available for customers.”

The entire post is on SBK’s Substack page.

Let’s not forget when the authorities were able to seize Robinhood Shares Worth $500M in FTX case. Sam Bankman Fried said he wants that money back for the shares he purchased in Robinhood shares. Not once did he say that the funds should help pay back investors who lost money, instead he said he wanted to use it for his defense to pay legal fees, The assets were seized, according to the DOJ, because they were purchased with misappropriated funds by Bankman-Fried.

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