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“I’ve Had A Bad Month” – Bankman-Fried Claims “Didn’t Knowingly Commingle Funds”, Blames Girlfriend’s Fund & “Accounting Mistakes”



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It appears Sam Bankman-Fried is using the ‘Simple Jack’ defense…

Bankman-Fried started the interview by saying he’s deeply sorry about what happened.

“I didn’t ever try to commit fraud on anyone,” Bankman-Fried (SBF) said.

He claims he was shocked by what happened this month.

“I have limited access to data,” Bankman-Fried said about his attempt to reconstruct what happened over the past month.

Which makes us wonder – if he didn’t have the data, who did? 

When pressed by Sorkin, Bankman-Fried said “I didn’t knowingly commingle funds”.

Which we note is not a denial, and as NYT notes, on the commingling of funds, there appears to be ample evidence suggests that Alameda and FTX shared an account at their U.S. banking partner Silvergate. Not sure how that could square with SBF’s claim that that didn’t occur, or wasn’t aware it was occurring.

Over and over again, SBF calls it an “accounting mistake” claiming that there was a difference between FTX’s audited financials vs FTX’s internal dashboards showing Alameda’s positions.

SBF tries to distance himself from the trading firm, claiming he did not have the bandwidth to run two companies (FTX and Alameda).

“I wasn’t running Alameda,” he says. 

“I was nervous because of the conflict of interest of being too involved.”

Clearly SBF is attempting to throw Caroline Ellison, the former CEO of Alameda under the bus as responsible for the downfall.

Asked when he knew there was a problem, he responded “Nov 6th”, which just happens to be the day that Changpeng Zhao, also known as CZ, publicly tweeted he’d be liquidating Binance’s holdings of FTT.

When they looked at the data, they realized “there was a potential, serious problem there,” he says. Alameda’s position was huge on FTX, and it had just taken a huge hit.

When asked by Sorkin if his lawyers support him speaking publicly about this, SBF says “no they are very much not.”

“I have a duty to talk and to explain what happened.”

“I’m looking to be helpful anywhere I can with any of the global entities,” he says.

SBF framed the whole debacle as a risk management problem that got out of hand in what he calls a “run on the bank,” and that he was unaware of any actions taken by Alameda.

The former White Knight notably squirmed uncomfortably when asked if he is concerned about criminal liability, stuttering the comment that “there’s a time and a place for me to think about  myself and my own future.  I don’t think this is it.”

“I don’t personally think that I have” criminal liability.

Asked whether FTX’s charitable endeavors were part of a PR campaign. Some were real, he said.  

But “there are things I felt like we needed to do for the business.”

With regard to his massive donations to Democrats and cozy relationships with regulators, he said he participated in these types of things, and he wishes that this wasn’t how the world worked, blasting the ‘greenwashing’ that many firms have to do.

“I spent probably thousands of hours in DC trying to get to the point where I could actually have meetings with some of the regulators,” Bankman-Fried said. He said it wasn’t an issue of donations or money — it was a matter of repeatedly asking for meetings and submitting documents.

Sorkin asks SBF about the adderal use and group sleepovers. SBF responds, “We messed up big.”

“Look, I screwed up,” adding that we “completely failed” on risk management, and conflict of interest risk. 

On reports of drug use at FTX, SBF says “there were no wild parties. At our parties we play board games. Twenty percent of people would have a quarter of a beer each and the rest of us would not drink anything.” 

He says he has been prescribed various things to help him concentrate. “I think they help me focus a little bit,” he says.

Finally, when asked if he was truthful, SBF said:

“I was as truthful as I’m knowledgeable to be,” SBF said. 

“I don’t know of times when I lied.”

Bankman-Fried ended the interview by admitting:

“I obviously wish that I spent more time dwelling on the downsides and less time thinking about the upsides.”

Perhaps the most memorable line of the whole thing was this: “Look, I’ve had a bad month,” claiming that he has just one working credit card left, and admitting “I don;t know what the future holds.”

Sadly, we have a feeling justice will never be done here for the 1000s of FTX clients who have lost millions…

“I can’t promise anyone anything,” he says.

*  *  *

As we discussed last week, Sam Bankman-Fried has now demonstrated that he is both a pathological liar and a sociopath, the kind who in “explaining” to his employees how he stole billions (over $4 billion according to new FTX CEO John J. Ray) from the now bankrupt FTX, an act which left it insolvent and without liquidity, called it “loans” which were “generally” not used for “large amounts of personal consumption” (just “small amounts” used for such trivial items as $40 million penthouses and private jets).

And the only reason we don’t officially call him a criminal just yet, is because he has not yet confirmed he used client money from his exchange to fund his personal hedge fund, an act which would cost any other individual decades in jail… but not prominent democrats like SBF or Jon Corzine, of course. Plus it’s the US legal system’s job to do that, not ours. Although we are growing increasingly skeptical this prominent Democratic donor will ever see the inside of a courtroom.

It’s not just us: with much of the entire world demanding to know how this corpulent 30-year-old still has not been thrown in prison, or at least charged with a variety of crimes, the NYT has now confirmed to the entire world what a farce the one-time paper of record has become, and how it is willing to whore itself out for clicks – not to mention prominent Democrat donors – because following such luminaries as Janet Yellen, Larry Fink, Mark Zuckerberg, and Volodymyr Zelensky, none other than SBF will be speaking with Andrew Ross-Sorkin at the NYT Dealbook “summit” this evening…

The shocked, stunned, and simply disgusted reactions to this grifter’s appearance have continued…

While the FTX founder hasn’t gone completely silent since the collapse of his crypto empire, this marks one of the first times he’ll speak in front of a live audience.

And while we are certain that the NYT – which we assume is done writing puff pieces on behalf of SBF after it became a laughing stock last week – would be quick to mercilessly cancel and expel from its “prestigious” conference anyone who had misgendered some post-op transsexual, it is willing to give this thieving pathological liar and sociopath a forum in which to profess his innocence to the entire world, and by association with other Democrat “celebrities” such as Bill Clinton.

The NYTimes points out that no questions will be off limits, and topics may include the collapse of the company, allegations of fraud and mismanagement and how Mr. Bankman-Fried intends to pay back customers, investors and creditors. Will Sorkin ask about the massive amounts of money given to Democrats?

Here’s some questions from Bloomberg’s Olga Kharif that we’d like answered:

  • Usually, when companies file for bankruptcy, their executives don’t talk to the press, tweet or participate in summits. Why are you doing the opposite? Why are you here?
  • How exactly did FTX find itself with an $8 billion shortfall? Did FTX use customer funds inappropriately? How, and when did that start?
  • The bank run on FTX started when Binance said it would dump its holdings of FTT — the FTX token you gave to Binance in 2021 when it exited its equity investment in FTX. Why did you give Binance the FTT token back then? Weren’t you worried that it gave Binance some power over you? Why did your relationship with Binance sour?
  • You have mentioned recently that you regret filing for bankruptcy because you could have raised the money necessary to plug the shortfall. Who was willing to give you funds?
  • What do you think the ramifications of FTX’s collapse will be for you personally? And the ramifications will be for crypto in general?

Ironically, just a few hours earlier on the same stage, BlackRock CEO Larry Fink said, about FTX, “We have to see how all this plays out,” adding that “right now we can make all the judgment calls that it looks like there was some misbehavior of major consequence.”

Andrew Ross Sorkin did note that he believes Bankman-Fried will be coming to us live from the Bahamas (so did not feel the need to set foot on US territory)

Bankman-Fried is due to speak around 1700ET

(NYT feed not embeddable – click image below to link to free NYT feed)

Alternative feed…

The NY Times has already warned that they’re monitoring reports of protests occurring at the conference today, which is being held at a venue in New York’s Columbus Circle. Here’s what they said in an email to attendees this week:

The New York Times and our employees defend freedom of speech everyday through our journalism, and we respect the right to peacefully assemble. At the same time, we want to ensure summit guests have an enjoyable, safe and productive experience. We do not expect these protests to impact the summit in a meaningful way, but we ask you allot extra time for travel and check-in.

The acknowledgement comes after social media users have urged one another to protest the event for giving Bankman-Fried a platform to share his side of what’s transpired this month.

As a reminder, at a bankruptcy hearing last week, FTX lawyers said that a “substantial amount” of the company’s assets were missing or stolen and that the exchange had been run like Mr. Bankman-Fried’s “personal fiefdom.”

One last thought:

This post was originally published at Zero Hedge

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Jamie Dimon Warns QT Will Lead To More Bank Failures



Zero Hedge

Drew Angerer/Getty Images

At the start of May we explained that it’s not just the Fed’s rate hikes that are behind the nascent regional bank crisis(because with Fed Funds rate at 5.25% and both T-Bills and money market funds offering similar yields, there is no way small banks can compete with these returns, prompting a bank jog (which periodically turns to a sprint) and deposit flight from both checking and saving accounts).

We said that the Fed’s ongoing QT is a just as pernicious threat to the viability of small/regional banks because with every dollar drained from the system as part of the Fed’s quantitative tightening, a matching deposit dollar is also destroyed, to wit:

Under an ample reserves framework, virtually all deposits are created by the Fed.

That’s why banks were forced to load up on low-yielding securities during 2000-2001 and are now getting crushed as yields soar and fixed income/loan prices plunge.

It also means that under QT as Fed reserves shrink, deposits must follow: as such deposits are either forced to shift into Bills/TSYs or are destroyed (bank failures).

Thus, the bank crisis is an inevitable side effect of Fed tightening.

Now, by now everyone knows that when it comes to banks failing (and capitalizing on it) few are as experienced as JP Morgan, aka JP Mega…

… aka JP More-gain, which now has more than 13% of the nation’s deposits and 21% of all credit card spending: in other words, there has never been a bank that is more systematically important than JPMore-gain… and with every small bank failure, Jamie Dimon’s goliath is only getting bigger. Which is why we found it curious that none other than Jamie Dimon confirmed what we said three weeks ago during JPM’s Investor Day on Monday.

This is what the billionaire CEO said:

We haven’t been through Quantitative Tightening. So we really don’t know what’s going to happen to deposits at all [ZH; actually we do: deposits will shrink dollar for dollar alongside reserves]. And that’s why I’ve been quite concerned about that. I’m probably more concerned about quantitative tightening with anybody in this room.

We’ve never had QT before. It just started, okay? And you see huge distortions in the marketplace already. We’ve never had the Fed in the market like this with that RRP program that Jeremy mentioned ever. They have $2.3 trillion basically lent out to money funds. And I don’t know the full effect of that. And obviously, that’s a direct deduction from deposits are rolling out it made sense to do.

So I think people should build into their mindset that they may have to move deposit beta more than they think and manage that. So I mean, if I was any bank or any company, I’d be saying, can you handle higher interest rates and surprise in deposits, etc?

And this is how JPM itself shows the impact of the shrinking Fed balance sheet and TGA/RRP liquidity drains soak up commercial bank deposits.

By the way, “deposit beta”, as Jamie calls it, for those unfamilliar is a polite way of saying bank run, which is a less polite way of saying bank failure. As for Dimon’s rhetorical last question, the answer is a resounding no, or so JPM’s shareholders would like because for the second time in a month, JPM hiked its Net Interest Margin forecast, this time courtesy of the bank’s FDIC/taxpayer-funded gift in the form of First Republic Bank.

According to a slide in the bank’s Investor Day presentation, JPMorgan will gain an even bigger benefit from rising interest rates because of its “purchase” of First Republic Bank. We put purchase in quotes because in reality it was a gift by the FDIC, which gave JPM all the good parts of the collapsed California bank, while taxpayers were left holding the nuclear waste.

The biggest US bank raised its guidance for net interest income this year to $84 billion up from a previous forecast of $81 billion, according to an Investor Day presentation. The reason: the failure of First Republic which directly boosted JPM’s top line by billions!

In other words, as other banks fail, JPM prospers: here is a history of JPM’s Net Interest Income courtesy of Bloomberg. It will only keep rising…

… as more banks fail.

It is no surprise then that it is Jamie’s sincerest wish for rates to keep rising…

… after all that’s the surest way for John Pierpont’s bank – which still pays 0.01% interest on most of its deposits – to once again become bigger than the US and to finally fulfill the reason behind creation of the Federal Reserves.

This post was originally published at Zero Hedge

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Debt Ceiling Negotiations Crumble, McCarthy And Biden To Hold Sunday Call As Impasse Intensifies



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Negotiations in Washington DC over the debt ceiling have taken a big step back over the weekend, as the White House and House Republicans continue to point fingers at each other.

It seems as though he wants default more than he wants a deal,” House Speaker Kevin McCarthy (R-CA) told Fox News on Sunday. “We have got 11 days to go,” McCarthy continued, urging Biden and the Democrats to be “sensible about this.”

Republicans have been pushing for substantial, longer-term spending reductions, arguing that Congress needs to roll the nation’s deficit spending back to 2022 levels, while restricting the growth of government spending. The White House, on the other hand, wants to achieve policy goals via taxation.

McCarthy said there’s some talk of extending the debt ceiling until 2025, but he said he’s demanding cuts to federal spending in exchange for GOP votes to do so. Biden, he said, is resisting.

The president keeps changing positions every time Bernie Sanders has a press conference,” he said.

McCarthy said Biden is demanding tax increases after earlier agreeing to keep them off the table. He also said Republicans have made compromises but didn’t specify them. –Bloomberg

Meanwhile, Biden – speaking at a press conference held after the Group of Seven (G-7) summit in Hiroshima, said that he would speak with McCarthy shortly, though he added that the Republican plan was unacceptable.

“The speaker and I’ll be talking later on the plane as we head back,” said Biden. “And our teams are going to continue working.”

“I’m willing to cut spending, and I proposed cuts in spending of over a trillion dollars,” he continued. “But I believe we have to also look at the tax revenues,” adding that the Republican proposal to cut $2 trillion in taxes would hurt the economy.

“Now it’s time for the other side to move from their extreme positions, because much of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden told reporters. “And it’s time for Republicans to accept that there is no bipartisan deal to be made solely on their partisan terms.”

He also rambled a lot.

Biden’s comments came after McCarthy on Saturday accused the White House of backtracking during negotiations, and told reporters that there would be no progress made until Biden returns from the trip.

“The White House is moving backward in negotiations,” McCarthy tweeted Saturday afternoon. “Unfortunately, the socialist wing of the Democrat Party appears to be in control—especially with President Biden out of the country.”

President Biden doesn’t think there is a single dollar of savings to be found in the federal government’s budget,” McCarthy tweeted in the evening. “He’d rather be the first president in history to default on the debt than to risk upsetting the radical socialists who are calling the shots for Democrats right now.”

One of McCarthy’s top deputies, House Financial Services Chair Patrick McHenry (R-NC) on Sunday said he’s ‘pessimistic’ about the current state of negotiations, and that there is no plans for DC-based negotiations to continue at this time.

In response to McCarthy’s comments, White House Press Secretary Karine Jean-Pierre issued a statement from Hiroshima, reiterating Biden’s c all for a “reasonable bipartisan budget agreement.”

“Last night in D.C., the Speaker’s team put on the table an offer that was a big step back and contained a set of extreme partisan demands that could never pass both Houses of Congress,” she said.

Meanwhile, Treasury Secretary Janet Yellen underscored the urgency of the situation, telling NBC that the likelihood the US would be able to pay its bills by mid-June is “quite low.”

“Well, there’s always uncertainty about tax receipts and spending,” Yellen told “Meet the Press” on Sunday. “And so it’s hard to be absolutely certain about this, but my assessment is that the odds of reaching June 15 while being able to pay all of our bills is quite low.”

“Deficits can be addressed both through changes in spending and also through changes in revenue — and Republicans have taken that off the table,” Yellen continued.

In short, drama right up to the finish line. Did you expect anything less?

This post was originally published at Zero Hedge

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Buffett Turns Gloomy: The “Incredible Period” For The US Economy Is Coming To An End



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While Warren Buffett’s insights on the economy are traditionally cheerful and uplifting – usually hitting at time of peak pessimism in the form of self-serving NYT op-eds or CNBC vignettes (and usually around the time the Omaha billionaire knows that the government will backstop his TBTF investments, unlike those of pretty much anyone else), on Saturday the head of Berkshire Hathaway had a far more downbeat and gloomy prediction for his own businesses – and the broader economy in general – the good times may be over.

Speaking at Berkshire’s annual general meeting in Omaha, Nebraska, the billionaire investor said he expects earnings at the majority of the conglomerate’s operations to fall this year as the coming economic downturn slows corporate activity further. He made his pessimistic comments even as Berkshire posted an almost 13% gain in operating earnings to $8.07 billion for the first quarter, up from $7.04 billion a year ago.

“The majority of our businesses will report lower earnings this year than last year,” Buffett, 92, said, before crowds of thousands at the event on Saturday according to Bloomberg. During the last six months or so, the “incredible period” for the US economy has been coming to an end, he said.

As Bloomberg notes Berkshire is often viewed as a proxy for economic health owing to the expansive nature of its businesses ranging from railroad to electric utilities and retail. Buffett himself has said Berkshire owes its success to the incredible growth of the US economy over the decades, but his prediction for a slowdown at his firms comes as upheaval at regional banks threatens to curtail lending as inflation and higher rates continue to bite.

Buffett’s long-time business partner Charlie Munger, 99, who joined him on stage, said the more-difficult economic environment will also make it harder for value investors, who typically buy stocks that look cheap compared to the intrinsic value of the businesses.

“Get used to making less,” Munger said.

Despite the broader pessimism, Buffett said he expects earnings at its insurance underwriting operations — which are less correlated to business activity — to improve this year. Berkshire already reported higher earnings at those businesses including auto-insurer Geico, which swung to profitability following six quarters of losses.

Geico posted $703 million in earnings as higher average premiums and lower advertising spending contributed to the gain even as claim frequencies fell, Berkshire said in a statement reporting its earnings Saturday. That revival follows a difficult period for the underwriting business as inflation took its toll on the cost of materials and labor.

Geico has been facing particular pressure from rivals including Progressive, which Buffett has called “well-run,” and Allstate which had long used telematics programs to track drivers and encourage better behavior before Geico introduced the offering. Geico’s profit also helped Berkshire’s insurance underwriting businesses deliver $911 million in profit compared with $167 million a year earlier.

Berkshire previously said it expected Geico to return to operating profitability in 2023, after securing premium rate increases. Still, Geico remains an issue for Berkshire, with top line growth in the quarter of less than 1% that “significantly lags peers,” CFRA analyst Cathy Seifert said.

I suspect rate hikes being put through to offset claim cost inflation is being met with policy cancellations,” she said. “While the loss of unprofitable policies is not always a bad thing- that’s not usually the policies — and policyholders — that leave.”

Other parts of the conglomerate took a bigger hit, with after-tax earnings from Berkshire Hathaway Energy falling 46.3% from the same time last year amid “lower earnings from the US regulated utilities, other energy businesses and real estate brokerage businesses.” Railroad results were also weaker than expected due to a fall in freight volumes and higher operating expenses, according to Edward Jones analyst Jim Shanahan.

But at one of Berkshire’s best known businesses, Brooks Running Co., Chief Executive Officer Jim Weber was skeptical of a steep consumer downturn.

“With unemployment being so low, it’s hard to be believing we’re going to fall off a cliff into a recession at the consumer level,” Weber said in an interview on Friday ahead of the meeting. “I wonder if this is going to be an asset-value recession.”

Among other topics discussed on Saturday were Buffett’s succession, the banking crisis, the US debt ceiling crisis, the company’s investment in Occidental, Chna’s upcoming invasion of Taiwan and more:

  • Succession planning: Buffett named Greg Abel, 60, as heir apparent in 2021, and the vice chair for non-insurance operations has had a more pronounced presence ever since. On Saturday, Buffett reaffirmed he was “100% comfortable” with the decision and even indicated a largely business-as-usual transition, for whenever that could be. “Greg understands capital allocation as well as I do. That’s lucky for us,” Buffett said at the meeting in Omaha, Nebraska. “He will make those decisions, I think, very much in the same framework as I would make them. We have laid out that framework now for 30 years.”
  • Occidental control: One analyst called it the biggest announcement of the day: Berkshire won’t make an offer for full control of Occidental Petroleum Corp., the energy firm it has spent months boosting its wagers on. The comment by Buffett likely helped temper speculation that Berkshire is seeking to own Occidental after winning approval from US regulators last year to acquire as much as 50% of the firm. Buffett didn’t rule out buying more stock of the Houston-based firm, adding it may — or may not — seek further purchases.
  • Banking Turmoil: Buffett and Munger were so sure they’d be questions about the recent banking turmoil that they jokily brought placards bearing the accounting classifications spotlighted during the upheaval. One was labeled “available for sale,” while the other read “held to maturity.” Striking a more serious note, Buffett faulted the executives in charge of the failed banks, arguing they should be held accountable for mistakes that were hiding in “plain sight.” He also called out “messed up” incentives in banking regulation, as well as poor messaging by regulators, politicians and the press to the American public about the upheaval. Buffett pointed to First Republic Bank, the insolvent bank which last weekend was acquired by JPMorgan after it collapsed after  offering jumbo, non-government-backed mortgages at fixed rates that were interest-only for 10 years in some cases — which Buffett called “a crazy proposition.”… “It was doing it in plain sight and the world ignored it ‘til it blew up,” Buffett said.
  • Debt Ceiling: As lawmakers race to resolve a standoff around the US debt ceiling, Buffett said he couldn’t see how Washington would allow the US to default on its debt, an outcome that would tip the financial system into turmoil. Investors and politicians are zeroing in on whether or not the US government can avoid crashing into its statutory debt ceiling and a potentially catastrophic technical default that could follow. Despite the impasse, Buffett reiterated his belief in America as an “incredible society” with “everything going for us.” Given the choice, he would still want to be born in the US, he said.
  • Geopolitics, Taiwan:  In Q4 Buffett slashed his holding of Taiwan Semi just months after disclosing a major stake in a quick reversal that spooked investors. Buffett said Saturday the company was one of the best managed and most important in the world, but that he didn’t like the location — a reference to Taiwan amid rising tensions between the island and China. Buffett and Munger emphasized the need for smooth relations between the US and China and urged increased trade. While the two will be competitive, they will always need to judge “how far you can push the other guy without them reacting wrong,” Buffett said.

Separately, Berkshire topped up its cash pile, ending the quarter with $130.6 billion, a $2 billion increase from the $128.6 billion at the end of the year. This means that Berkshire stands to make a bonanza from interest income as the Fed keeps hiking rates: “Our investment income is going to be a lot larger this year than last year, and that’s built in,” Buffett said at the annual meeting.

The company was also a net seller of equities for the second quarter in a row, pocketing $10.4 billion in net stock sales ($13.3 billion gross) after deducting purchases of $2.9 billion.

Finally, Berkshire bought back $4.4 billion of stock, an increase from the same period last year, as Bekrshire confronted turbulent markets that offered fewer of the blockbuster deals he’s renowned for. Berkshire has turned toward buybacks more often as valuations in public markets had made it more challenging for Buffett to identify promising acquisitions.

This post was originally published at Zero Hedge

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