Last updated on November 2, 2023
During the ongoing trial of Sam Bankman-Fried, co-founder of the now-defunct FTX crypto exchange, shocking revelations have emerged regarding his understanding of cryptocurrency. According to live coverage of the trial by The Guardian, Bankman-Fried confessed to knowing “basically nothing” about cryptocurrency before launching FTX and its affiliated hedge fund, Alameda Research. He admitted that he had no idea how cryptocurrencies worked and merely knew that they could be traded. Furthermore, Bankman-Fried and his co-founder Gary Wang had no clue how to attract customers when they first started the exchange.
In addition, Bankman-Fried discussed FTX’s collapse and the role of FTT, the cryptocurrency created by FTX. Customers rushed to withdraw funds from FTX after reports revealed that Alameda Research’s loans heavily relied on FTT. Bankman-Fried portrayed FTT as a beneficial token for FTX users, explaining the concept of “buy and burn,” where FTX used a portion of its earnings to buy and eliminate FTT tokens, providing value to FTT holders. Throughout his testimony, Bankman-Fried attempted to depict the growth of his exchanges as a result of growing pains rather than intentional wrongdoing. He admitted to making management mistakes and acknowledged the lack of a dedicated risk management team as the most significant oversight.
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