Who Sam Bankman-Fried was going to blame for FTX’s collapse – until his arrest

Founder and CEO of cryptocurrency exchange could not appear before Congress

Prior to his arrest on Monday night in The Bahamas, disgraced cryptocurrency CEO and founder of FTX Sam Bankman-Fried was scheduled to testify before Congress about the implosion of his crypto exchange.

As he is supposed to appear in court in Nassau on Tuesday awaiting extradition to the US, his testimony on Capitol Hill could not go ahead.

However, Forbes obtained and published his prewritten opening remarks that would have begun his testimony before the House Committee on Financial Services.

Mr Bankman-Fried begins by saying: “I f***ed up”, which that did not go down well when referenced at Tuesday morning’s hearing where it was described as “disrespectful”.

“I know that it doesn’t mean much to say that I’m sorry. And so I’m dedicating as much of myself as I can to doing right by customers,” the FTX founder continues. “When all is said and done, I’ll judge myself primarily by one metric: whether I have eventually been able to make customers whole. If I fail our customers in this regard, I have failed myself.”

While he may begin with apparent contrition, Mr Bankman-Fried appears to have then intended to blame a long list of other people and entities for the collapse of FTX.

Specifically, the founder of FTX planned to say: “I wish I had not clicked on a button on Docusign at 4.30am, leaving some of FTX under destructive leadership.”

Here’s who Mr Bankman-Fried blames for what happened at the company he founded, per reporting by Forbes.

Current FTX CEO John Ray III

Mr Bankman-Fried took aim at current CEO John Ray III who has handled the bankruptcy of other major companies, including Enron. In Mr Bankman-Fried’s absence, Mr Ray appeared alone in front of the House committee.

Despite having nominated John Ray as the CEO of various FTX entities, Mr Bankman-Fried alleges that Mr Ray is not the chief executive of FTX International, and that “American customers were protected, at least until Mr Ray’s team took over.”

Over the past several weeks – and again on Tuesday in the House – Mr Ray has been vocally critical of Mr Bankman-Fried’s oversight, attributing the company’s demise to “a complete failure of corporate controls.”

“When John Ray became CEO of FTX US on November 10th, 2022, FTX US was still operational, and still processing customer withdrawals,” Mr Bankman-Fried wrote in his prepared remarks.

“I intended and expected for withdrawals to remain open, making all customers whole. I am surprised that did not happen.”

He also claimed that he reached out to Mr Ray and his team “numerous times,” sometimes “requesting access to my own data, but other times I’ve been attempting to alert them to potentially important information for their jobs and duties to creditors and customers of FTX”.

“He has not responded, for instance, to an email of mine that stated: ‘I have potentially pertinent information concerning future opportunities and financing for FTX and its creditors. I also believe that I have relevant financial information about FTX US, and further that I have potentially relevant regulatory information concerning FTX. I would love to talk to you, whether it’s via email or phone, and to work constructively with you and the Chapter 11 team to do what’s best for customers.’”

Binance cofounder Changpeng Zhao (CZ)

The co-founder and CEO of Binance, the world’s largest cryptocurrency exchange, tweeted that he intended to sell all of the company’s holdings of FTX’s native token FTT in early November, triggering a bank run on FTX and leading to its collapse. CZ has therefore been blamed by Mr Bankman-Fried.

In his planned testimony, Mr Bankman-Fried planned to reiterate most of his attacks — including that the actions of CZ led to “what I believe to be a month of sustained negative PR on FTX”.

Mr Bankman-Fried signed a letter of intent for Binance to acquire FTX, which prevented them approaching other potential investors.

“During that time, I received serious expressions of interest from multiple potential investors who represented billions in capital that could have gone to customers,” Mr Bankman-Fried wrote in his prepared remarks. “I was inhibited in responding by the [letter of intent].”

He learned from Twitter that Binance was pulling out of the acquisition. “As best I can tell, Binance never intended to go through with the deal.”

Law firm Sullivan & Cromwell

Mr Bankman-Fried alleges that he was “pressured” by law firm Sullivan & Cromwell to sign Chapter 11 documents and that they were filed despite his instructions not to.

The firm was retained by FTX when the exchange collapsed to represent it in Chapter 11 proceedings. Mr Bankman-Fried has said he regrets filing for Chapter 11 for FTX US

“I have 19 pages of screenshots of Sullivan & Cromwell, Mr Miller [FTX general counsel], and others I believe were influenced by them, all sent over a two day period, pressuring me to quickly file for Chapter 11,” he was going to tell Congress. “They range from adamant to mentally unbalanced.”

He also blames Sullivan & Cromwell and Mr Ray for not releasing funds for FTX US customers and alleges that there was a financial motive, claiming that the law firms that represented Enron “were paid roughly $700m (!!!) in fees from funds that would otherwise have gone to creditors”.

FTX US general counsel Ryne Miller

Mr Bankman-Fried also hit out at Ryne Miller, the general counsel of FTX US, for being part of this so-called pressure campaign for FTX US to file for Chapter 11.

In his testimony, Mr Bankman-Fried includes a text from MNr Miller to FTX leadership in which he asks for $4m in legal fees to pay Sullivan & Cromwell. “I’m in charge now,” Mr Ryne texted.

Mr Bankman-Fried implies that Mr Miller was in league with Sullivan & Cromwell to push him to file for Chapter 11, despite his claims that there were many calls from prospective investors.

Mr Miller, he planned to say, told him that there was nothing left of the company to save.

A ‘historical accounting quirk’

Among the explanations he has given as to why FTX collapsed, Mr Bankman-Fried claims that the failures of internal controls included a “historical accounting quirk” that meant the FTX dashboard did not show the accurate size of the holdings of Alameda Research — the trading arm.

“I now believe that Alameda’s position was over twice as large as what was displayed,” he says in his prepared remarks. “My periodic assessments of the riskiness of our positions were often based on the dashboard’s numbers.”

Mr Ray’s testimony on Tuesday morning also included the astonishing revelation, or perhaps “quirk”, that the multi-billion dollar company used QuickBooks software for its accounting purposes — something more often used by small businesses.