The fallen founder of the cryptocurrency exchange is invited to testify before U.S.. lawmakers.
Sam Bankman-Fried is the executive of the end of this year.
If he was already prominent in the crypto industry, he has become a global figure since Nov. 11, the date his crypto empire filed for bankruptcy.
This empire was made up of FTX, the cryptocurrency exchange, and Alameda Research, a hedge fund that also was a trading platform.
The overnight implosion of this group caused an earthquake, the full consequences of which will take a long time to assess. Crypto-space players fear many collateral victims because FTX was at the center of the crypto game.
The regulators’ investigations are ongoing. But FTX and its sister company Alameda, which were supposed to be two independent groups, appear to have been closely tied.
As a crypto exchange, FTX executed orders for clients, taking their cash and buying cryptocurrencies on their behalf. FTX acted as a custodian, holding the clients’ crypto.
Media Offensive
FTX then used its clients’ crypto assets, through Alameda Research’s trading arm, to generate cash through borrowing or market-making. The cash FTX borrowed was used to bail out other crypto institutions in summer 2022.
At the same time, FTX was using the cryptocurrency it was issuing, FTT, as collateral on its balance sheet. This was a significant exposure, due to the concentration risk and the volatility of FTT.
FTX’s insolvency stemmed from a liquidity shortfall when clients attempted to withdraw funds from the platform. The shortfall appears to have resulted as Bankman-Fried allegedly transferred $10 billion of customer funds from FTX to Alameda Research.
John Ray, FTX’s new CEO in charge of the restructuring, said that software allegedly allowed the company to hide these transfers from third parties.
The fall of FTX, which had been valued at $32 billion in February, has been compared to the collapse of Lehman Brothers in 2008, marking the start of the financial crisis.
Bankman-Fried does not seem to like this comparison. He recently embarked on a media offensive, including interviews with The New York Times, the Financial Times, ABC News and others, to rewrite the narrative and give a less damaging version of his downfall.
Congress Must Wait
Rep. Maxine Waters (D-California), chairwoman of the House Financial Services Committee, invited the deposed former king of crypto to appear before the panel on Dec. 13.
“@SBF_FTX, we appreciate that you’ve been candid in your discussions about what happened at #FTX,” the congresswoman wrote on Twitter on Dec. 2. “Your willingness to talk to the public will help the company’s customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th.”
Bankman-Fried, who was the institutional face of crypto and spent a lot of time in Washington lobbying for the sector, doesn’t seem to be in a rush to take up the invitation.
“Rep. Waters, and the House Committee on Financial Services: Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain,” SBF responded on Dec. 4. “I’m not sure that will happen by the 13th. But when it does, I will testify.”
Bankman-Fried, however, continues to give media interviews. For some observers, he’s giving the impression that he is more concerned with his image than with helping the authorities piece together what has caused one of the biggest financial fiascos of recent years.
