Math doesn’t seem to be the MIT grad’s forte.
Disgraced FTX founder Sam Bankman-Fried – an alumnus of the lauded university – has offered a strange explanation for the $8 billion budget shortfall that forced the floundering cryptocurrency platform into bankruptcy last month – saying he simply “miscalculated” the cash he did.
Bankman-Fried was quick to explain what happened at FTX In an interview with Bloomberg From his luxury penthouse in the Bahamas. During the interview, the hacked crypto broker pulled out a spreadsheet from FTX and its sister trading firm Alameda Research detailing the wrong math they used when approaching investors for a potential last-second bailout.
In a section titled “What I *Think,” Bankman-Fried listed $8.9 billion in liabilities against nearly $28 billion in assets, $9 billion of which were “liquid.” In another section with real numbers, FTX had $8 billion less in liquid assets than Bankman-Fried claimed.
“It seems simple to me, you know, there are still significant liabilities, but we have to cover that,” Bankman-Fried told Bloomberg.
A Bloomberg reporter then pointed out the $8 billion difference.
“You lost $8 billion?” the reporter asked.
Bankman-Fried, who minored in mathematics while graduating from MIT with a bachelor’s degree in physics, replied: “The math is wrong.”
The report highlights how mixed the finances were for FTX and Alameda before the company went bankrupt. Last month, Reuters reported that Bankman-Fried secretly transferred $10 billion of FTX client funds to back Alameda Research’s risky bets.
Bankman-Fried made his latest defense of the FTX explosion from the luxury penthouse where his ex-girlfriend Caroline Ellison and a small group of roommates ran FTX and Alameda Research. Ellison served as Alameda’s CEO until the breakup.
Bankman-Fried claimed that customers occasionally transferred their money to Alameda rather than to FTX. He claims that the FTX system counted these funds twice, which may explain the discrepancy in the numbers.
The disgraced executive did not fully explain what happened to the $8 billion in assets missing from the simple balance sheet.
“I was very lazy with this mental math,” Bankman-Fried said in an interview.
Bloomberg also pressed Bankman-Fried to respond to criticism that he was pinning the blame for FTX’s collapse on Ellison and other subordinates.
“I think the biggest failure was that it wasn’t entirely clear whose fault it was,” he replied.
FTX’s poor accounting practices under Bankman-Fried and its allies drew sharp criticism from the company’s new management when it filed for bankruptcy court.
John Ray III, the new CEO who led Enron into bankruptcy, said FTX’s accounting practices and corporate governance standards were the worst he had ever seen. He also talked about Bankman-Fried and others spending $300 million on luxury real estate and spending requests confirmed with emojis.
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