'I Don't Recall': SBF's Congressional Testimony Before the Collapse

Sam Bankman-FriedI would like to start by saying that I'm sorry. I'm sorry for what happened. I'm sorry for the people who lost money. I'm sorry for the people who trusted me. I never intended for any of this to happen. I did not commit fraud. I did not knowingly commingle funds. I made mistakes. I was not nearly as on top of things as I should have been. But I did not steal customer funds.

Rep. Maxine Waters, ChairMr. Bankman-Fried, you have been invited here today to answer questions about the collapse of FTX and the loss of billions of dollars in customer funds. I hope you will be forthcoming with this committee.

Bankman-FriedI will do my best, Chairwoman.

Rep. WatersMr. Bankman-Fried, FTX customers are missing approximately $8 billion. Where is the money?

Bankman-FriedI don't have access to all of the data right now. I'm not running the company anymore. The new CEO, John Ray, and the bankruptcy team have access to the records. I believe that there are significant assets that can be recovered.

WatersYou are the founder and former CEO. You were running the company when the money disappeared. I'm asking you directly: where is the $8 billion?

Bankman-FriedI understand the question. I don't have a complete answer. I believe a substantial portion of the shortfall is the result of a margin position that Alameda Research took, which was not properly hedged, and which was liquidated during the market downturn. That's my understanding of the primary driver of the shortfall.

WatersAlameda Research is a trading firm that you also founded and controlled. Are you telling this committee that you lost $8 billion of customer money because of a bad trade?

Bankman-FriedI'm telling the committee that Alameda had a margin position that was not properly hedged, and that when the market declined, that position was liquidated. That is my understanding of the primary driver of the shortfall.

Rep. Patrick McHenryMr. Bankman-Fried, did you direct Alameda to use FTX customer funds to pay down Alameda's loans?

Bankman-FriedI don't recall directing that. I was not involved in the day-to-day operations of Alameda.

McHenryWere you aware that Alameda was using FTX customer funds?

Bankman-FriedI was not aware of that at the time. I was aware that Alameda had a margin position on FTX. I was not aware of the extent to which that position was funded by customer deposits.

McHenryYou were the CEO of FTX. You were the founder of Alameda. You were the majority owner of both. And you want this committee to believe that you had no idea what was happening with the money?

Bankman-FriedI want the committee to understand that I was not as involved in the details as I should have been. I was focused on other things. I did not have a clear picture of Alameda's balance sheet. That was a mistake. I should have been more involved. I should have understood the risks better. I didn't. And people got hurt.

Rep. Stephen LynchMr. Bankman-Fried, it has been reported that FTX had a secret backdoor that allowed Alameda to borrow customer funds without triggering the exchange's risk controls. Did you know about this backdoor?

Bankman-FriedI don't recall any such backdoor. I was not involved in writing the code for the exchange's risk management systems.

LynchYou're a programmer. You founded the company. You wrote the early code yourself. And you have no idea how Alameda was able to borrow billions of dollars of customer funds without triggering any alarms?

Bankman-FriedI wrote some of the early code, but the exchange's codebase grew far beyond what I was directly involved in. I was not a hands-on programmer in the later years of the company. I don't know the specifics of how the risk management systems were configured.

LynchLet me ask you another way. Did you personally benefit from the use of customer funds?

Bankman-FriedNo. I did not personally benefit. I did not take customer funds for personal use. I lived a relatively modest lifestyle. I didn't buy yachts or private jets or anything like that. The money was reinvested in the business.

LynchYou bought $300 million in Bahamas real estate. You donated $40 million to political campaigns. You spent millions on stadium naming rights. That's not a modest lifestyle, Mr. Bankman-Fried.

Bankman-FriedThose were business investments and charitable donations. The real estate was for FTX employees. The political donations were for causes I believed in. The stadium naming was marketing. I don't believe those were personal expenses.

Rep. French HillMr. Bankman-Fried, you tweeted on November 7 that "FTX is fine. Assets are fine." You deleted that tweet later that day. FTX filed for bankruptcy four days later. Why did you tweet that FTX was fine when it wasn't?

Bankman-FriedAt the time I sent that tweet, I believed that FTX's assets were substantially intact. I believed that the liquidity crunch was manageable. I was wrong. The situation deteriorated faster than I anticipated. I deleted the tweet because it was no longer accurate.

HillYou also told investors, customers, and regulators that FTX did not lend customer funds to Alameda. That was a lie. You told this committee in a letter that you were not aware of any commingling of funds. That was also not true. How many lies did you tell, Mr. Bankman-Fried?

Bankman-FriedI don't believe I lied. I believe I was mistaken. I gave answers based on what I knew at the time. I did not have a complete picture of what was happening with Alameda. I was not given accurate information by the people who were running Alameda. I made statements that turned out to be wrong. That's different from lying.

HillIt's not different when you're the CEO and you have a duty to know. You had a duty to know what was happening with customer funds. You either knew and lied about it, or you didn't know because you deliberately chose not to look. Either way, it's unforgivable.