SBF's ignorance-as-defense strategy cuts no ice

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By Geoffrey Smith 

AiVIF.com -- Sam Bankman-Fried continues to claim he didn't know of any wrongdoing at FTX, but the world isn't buying it.

In an interview with New York Times columnist Andrew Ross Sorkin on Wednesday, the founder of the collapsed crypto exchange leaned heavily on arguments that boiled down to admissions of ignorance or a lack of understanding when pressed on how his exchange - which told customers their assets would be held separately from its own funds - ended up lending billions of dollars to hedge fund Alameda Research.

Alameda was also majority-owned and controlled by Bankman-Fried until it was included with 130 other FTX affiliates in its chapter 11 bankruptcy filing. It had borrowed heavily from FTX over the summer to cover up losses arising from the collapse of the Terra/Luna stablecoin network. According to data from Arkham Intelligence, it had drained $204 million from the exchange only days before FTX collapsed. The gap between their combined assets and liabilities is widely estimated at over $8 billion, suggesting that the majority of customer deposits - which weren't protected by any insurance scheme - will not be recovered.

"I didn't ever try to commit fraud on anyone," Bankman-Fried said, adding later that "I didn’t knowingly commingle funds" and "I don't know of times when I lied."

As regards, Alameda, he argued: "I wasn't running Alameda, I didn't know exactly what was going on. I didn't know the size of their position."

However, most observers of FTX's implosion were unimpressed.

"Ignorance of the law is not a defence. And nor is incompetence," tweeted Frances Coppola, a veteran financial commentator based in the U.K.

Dan Davies of Frontline Analysts was even more scathing.

"When you tell people their money is segregated and it's not, when you use one company's bank account and represent it as another, that's fraud!" he argued. "Fraud isn't a "subjunctive crime". Even if you make the money back, even if the client funds are eventually protected, the fraud still happened."

Ross Gerber, CEO of San Francisco wealth management firm Gerber Kawasaki, had tuned in, along with thousands of others, hoping to hear more than the generally long-winded and evasive answers that Bankman-Fried gave to simple and direct questions about the missing customer funds. He soon gave up.

"Had to turn this off. Call me when he is wearing orange," Gerber tweeted halfway through the interview.

However, 'SBF' could still count on pockets of support from the global audience.

"Call me crazy, but I think SBF was telling the truth," tweeted Bill Ackman, the billionaire investor behind Pershing Square.

Ackman is a belated convert to cryptocurrency, having invested in recent months in projects such as DIMO, Goldfinch Finance, and ORIGYNTech. He argued in a blog post after FTX's collapse that "crypto is here to stay and with proper oversight and regulation, it has the potential to greatly benefit society and grow the global economy."