Former President of FTX US Brett Harrison shared details of his tenure under Sam Bankman-Fried on Saturday, distancing himself from the disgraced crypto mogul who’s been charged with a series of financial crimes.
In a flurry of Twitter posts, Harrison accused Bankman-Fried of “gaslighting and manipulation,” claiming he was isolated as a leader while working to build out the defunct cryptocurrency exchange’s presence in the U.S.
Harrison stepped down from FTX’s U.S. division in September, just weeks before Bankman-Fried’s crypto empire began to crumble—but says his relationship with the former CEO had begun to fall apart long before that.
“My relationship with Sam Bankman-Fried and his deputies had reached a point of total deterioration, after months of disputes over management practices at FTX,” he wrote.
Former FTX US President Promises to Share More Information ‘In Time’
While Harrison led FTX US for a total of 17 months, the former high-ranking employee said he threatened to leave the company in April of last year—just 11 months into his role—over “organizational problems” that he identified with FTX’s structure.
Harrison said one issue he flagged was the separation of FTX’s legal, development, and executive teams, which had influence over both FTX US and the company’s international exchange, according to Harrison.
Harrison said Bankman-Fried ultimately disagreed with the suggested structural changes early on in his role at FTX US, describing the FTX founder as stubborn and spiteful when his authority was questioned.
Harrison added that he faced “tremendous pressure not to disagree with Sam” as president of FTX US, along with other employees who worked within the cryptocurrency exchange’s U.S. division. He said the team’s professional background was rendered “irrelevant and valueless.”
“I wasn’t the only one at FTX US who disagreed with Sam and members of his inner circle,” he stated. “FTX US was staffed with experienced professionals from US finance firms, law firms, and regulated exchanges.”
Other sticking points Harrison said he identified were “the delegation of managerial responsibility and controls,” which he said were handled by Bankman-Fried and other company executives based in the Bahamas, where FTX was based.
He also wanted to make more transparent the software development responsibilities of FTX co-founder Gary Wang and Nishad Singh, the former FTX engineering chief who is now seeking a cooperation deal with federal prosecutors in New York pertaining to Bankman-Fried’s criminal trial.
Attorneys in the Southern District of New York filed charges against Wang last month, as well as the former CEO Alameda Research, Caroline Ellison, who led the trading firm founded by Bankman-Fried before FTX. Wang and Ellison are both cooperating with investigations into FTX. Singh and Harrison have not been accused of wrongdoing.
Prosecutors have charged Bankman-Fried with eight criminal charges, including fraud and money laundering. He is accused of siphoning billions of dollars worth of customer funds away from FTX to cover trades made by Alameda, donate to political campaigns, purchase private real estate, and expand his business.
After submitting a formal complaint about issues he identified with FTX’s structure, Harrison resolved to leave the company upon receiving backlash, stating he was “threatened on Sam’s behalf” that he would be fired and his professional reputation ruined.
FTX US President Brett Harrison Stepping Down, Shifting to Advisory Role
Harrison explained he was initially sympathetic towards Bankman-Fried’s unfavorable leadership, stating he thought “addiction and mental health problems” could’ve been a contributing factor.
The former FTX US president had come to know Bankman-Fried as a junior trader at New York-based trading firm Jane Street, where Ellison also got her start in finance as an intern. Harrison had worked there for over seven years prior to roles at Citadel Securities and Headlands Technologies.
In addition to the proficiency Bankman-Fried displayed in a programming class he taught, Harrison developed a positive perception of Bankman-Fried as a “sensitive and intellectually curious person who cared about animals,” and senior traders “indicated he had promise.”
During Harrison’s time at FTX US, the company was hit with a cease-and-desist-letter from the Federal Deposit Insurance Corporation over a false and misleading statement made by Harrison. In a now-deleted Tweet, Harrison had claimed “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names.”
When asked about the statement via Twitter on Saturday by EZPR founder and CEO Ed Zitron, Harrison blocked Zitron’s account, according to a recent post made by Zitron. Zitrion told Decrypt that Harrison’s move was “laughable.”
FTX US Hit With FDIC Cease-and-Desist Over 'False and Misleading' Statements
Harrison did not respond immediately to requests for comment, but he replied to Zitron’s question stating “it’s impossible to have a good faith or fact-based discussion” about the incident on Twitter.
When Harrison departed from FTX US in September, he announced that he would be shifting into an advisory role with the firm over the next few months but wouldn’t be leaving the crypto space in his next role.
“I don’t doubt my experiences in this role will be among the most cherished of my career,” he stated. “I’ll be assisting Sam and the team with this transition to ensure FTX ends the year with all its characteristic momentum.”
Harrison is currently launching a crypto software company, for which he recently sought funding at a valuation of up to $100 million, Bloomberg reported last month. In a reply to Harrison’s thread on Saturday, American financier and former White House director of communications Anthony Scaramucci identified himself as an investor.
Scaramucci's investment firm Skybridge Capital received $40 million from Bankman-Fried's FTX Ventures in September in exchange for a 30% stake in the investment firm. FTX was also featured prominently as a sponsor at SALT New York last year, a networking event affiliated with Skybridge.
“I am proud to be an investor in your new company,” Scaramucci stated. “Go forward. Don’t look back.”
Morgan Chittum
Sun, January 15, 2023
Sam Trabucco was the co-CEO of Alameda Research.
Sam Trabucco was Alameda Research's co-CEO. He left the crypto hedge fund a few months before its collapse.
Before he left Alameda, he reportedly went on a $10 million all-cash property buying spree and bought a 52-foot yacht.
US prosecutors have not alleged Trabucco with any wrongdoing.
Sam Trabucco stepped down as the co-CEO of trading firm Alameda Research in August, just months before Sam Bankman-Fried's crypto empire filed for bankruptcy and lost $8 billion of customer money.
Around the time of his departure in late August, he tweeted, "But if I've learned anything at Alameda, it's how to make good decisions – and this is the right one for me."
Whereabouts of Trabucco, who has not been accused of any wrongdoing, are unclear. Here's what we know about one of the top executives at Alameda Research.
Bankman-Fried was the sole CEO of Alameda from its inception until October 2021 when Ellison and Trabucco took over. Trabucco was formally in his role as Alameda's co-CEO for less than a year, according to a court filing, from October 2021 to August 2022.
Trabucco, 30, hasn't publicly been accused of any wrongdoing. He stepped down from the company in August, shifting Caroline Ellison into the role of Alameda's CEO.
Trabucco significantly reduced his role at Alameda in this months leading up to his departure. He couldn't "personally continue to justify the time investment of being a central part of Alameda," he tweeted, adding that he would be staying on as an advisor to the company but would not have a "strong day-to-day presence."
Trabucco wanted to "prioritize other things."
"What other things? I'm really not sure, exactly. Lately I've been really happy, spending a lot of time traveling, visiting friends and family, working on 'myself' and whatnot," he said. "Also I bought a boat, that's been cool. I needed to relax, and I'm really, really happy."
Before he left Alameda, it was reported that Trabucco a went on a $10 million all-cash property buying spree, purchasing two luxury apartments in San Francisco, according to Protos. He also bought a 52-foot yacht, which he called "Soak my Deck." The Financial Times reported that Trabucco even paid a freelancer on Fiverr to design the boat's logo.
A little over a month after his departure from FTX, Trabucco tweeted: "Why are journalists so excited to make my stepping down about something other than a desire to go fast over the nice water."
Bankman-Fried and Trabucco have known each other for over a decade. They met at a five-week math camp at Mount Holyoke College in 2010, where Trabucco said Bankman-Fried rarely slept during his stay, Insider reported.
The two later reconnected in college at Massachusetts Institute of Technology, where Trabucco studied math and computer science. Before joining Alameda as a trader in 2019, he had a stint as a quant trader on Susquehanna's bond exchange-traded fund desk, according to his LinkedIn.
In a press release announcing Trabucco and Ellison's move to become co-CEOs, the company said the two will "oversee all operations at Alameda while also collaborating to execute on the strategy the organization" and "focus on managing the trading desk."
The former exec was an aggressive crypto trader, employing risky bets in Alameda's business. Trabucco has indicated in a series of public comments that he also employed poker and blackjack strategies in trading, Bloomberg reported.
"Bigger is Bigger (when Betting is Better)," he tweeted in January of 2021, explaining how his gambling experience shaped his trading methods. "Getting it in good is a poker term referring to the idea that, when your odds are best.... you wanna bet more."
When crypto exchange OKX suspended user withdrawals on its platform in January of 2021, Alameda began buying out positions of investors wanting to reduce exposure.
"Not only are we not sellers, we're HUGE buyers -- even though it's risky -- because, in fact, we can take the risk and this trade is GREAT according to what we know -- was crucial, and it's something we're always aiming to do," he tweeted.
As for his involvement in FTX's downfall, US prosecutors have not said Trabucco was involved in any wrongdoing even as he worked in Alameda's C-suite with several execs who are now facing a slew of charges.
"[Sam] is not really involved in day-to-day operations in Alameda," Trabucco told CoinDesk in October of 2021. "Caroline and I have been leading the charge [at Alameda] for quite some time."
Despite his claims to the news outlet over a year ago,"Bankman-Fried remained the ultimate decision-maker at Alameda, even after Ellison and Trabucco became co-CEOs," the US Securities and Exchange Commission said in its complaint against the fallen FTX CEO.
The court document reads: "Bankman-Fried directed investment and operational decisions, frequently communicated with Alameda employees, and had full access to Alameda's records and databases."
Trabucco did not respond to Insider's request for comment.
The disgraced former crypto king continues to tell a version of events that ignores regulators' allegations against him.
LUC OLINGA
JAN 14, 2023
Sam Bankman-Fried faces a series of criminal and civil charges, including alleged fraud.
The trial of the disgraced founder of cryptocurrency exchange FTX and its sister company Alameda Research, a hedge fund and trading platform, is scheduled for October.
Bankman-Fried was released on bail on Dec. 21 after being extradited from the Bahamas where he lived and where FTX's headquarters were based.
The former trader pleaded not guilty on Jan. 3 during a hearing in New York.
Facing the court, he remained silent but since Bankman-Fried, known by the initials SBF in the crypto space, has resumed speaking on social networks. He tries, as during his apology tour at the end of November/beginning of December, to exculpate himself. In doing so, he tries to blame others.
He has just done this in a blog post in which he points the finger at the powerful law firm Sullivan & Cromwell. To be clear, Bankman-Fried is not accusing Sullivan & Cromwell of any wrongdoing related to FTX or Alameda Research.
Jabin Botsford/The Washington Post via Getty
He accuses Sullivan & Cromwell of conflicts of interest. He also claims that the law firm forced him to file for bankruptcy and to choose John Ray, the new CEO of FTX, as liquidator of FTX and Alameda Research. Basically, if his empire is in disarray it is the fault of Cromwell & Sullivan because there were other options than bankruptcy, says Bankman-Fried.
"Senators have raised concerns about a potential conflict of interest from Sullivan & Crowell (S&C)," the former crypto emperor wrote. "Contrary to S&C’s statement that they 'had a limited and largely transactional relationship with FTX', S&C was one of FTX International’s two primary law firms prior to bankruptcy, and were FTX US’s primary law firm."
He continued: "FTX US’ GC came from S&C, they worked with FTX US in its most important regulatory application, they worked with FTX International on some of its most important regulatory concerns, and they worked with FTX US on its most important transaction. When I would visit NYC, I would sometimes work out of S&C’s office."
GC stands for General Counsel. FTX US is the American subsidiary of FTX. Consumers residing in the United States wishing to buy or sell cryptocurrencies and other digital assets (NFTs) via FTX could only do so through FTX US, an entity based on American soil.
"S&C and the GC were the primary parties strong-arming and threatening me into naming the candidate they themselves chose as CEO of FTX -- including for a solvent entity in FTX US -- who then filed for Chapter 11 and chose S&C as counsel to the debtor entities," Bankman-Fried asserted without providing any evidence.
Sullivan & Cromwell did not respond to a request for comment.
The law firm is FTX's lead counsel in its bankruptcy.
'Pressured'
Four U.S. senators -- Sens. John Hickenlooper (D-Colo.), Thom Tillis (R-N.C.), Elizabeth Warren (D-Mass.) and Cynthia Lummis (R-Wyo.) -- recently wrote to Delaware Judge John Dorsey to point out that, given the past relationship between FTX and Sullivan & Cromwell, the law firm was not in the best position to deal with the current bankruptcy proceedings.
The bipartisan group of senators wrote that the law firm has "advised FTX for years leading up to its collapse and one of its partners even served as FTX’s general counsel."
As a result, "the firm is simply not in a position to uncover the information needed to ensure confidence in any investigation or findings."
"The firm had a limited and largely transactional relationship with FTX and certain affiliates prior to the bankruptcy,” Sullivan & Cromwell responded in a statement according to Bloomberg. A "broad team of sophisticated professionals, including conflicts counsel,” is advising FTX in bankruptcy.
The law firm has already said in court documents that it collected $8.5 million from FTX for work related to regulatory requests and transactions.
Dorsey found the senators' letter 'inappropriate' but said he will "make my decisions on the matters referred to in the letter based only upon admissible evidence and the arguments of parties and interest presented in open court."
Bankman-Fried says there was another option other than bankruptcy.
"Despite its insolvency, and despite processing roughly $5b of withdrawals over its last few days of operation, FTX International retains significant assets – roughly $8b of assets of varying liquidity as of when Mr. Ray took over," he asserted without providing evidence.
"In addition to that, there were numerous potential funding offers – including signed LOIs (letters of intent) post chapter 11 filing totaling over $4b. I believe that, had FTX International been given a few weeks, it could likely have utilized its illiquid assets and equity to raise enough financing to make customers substantially whole."
Bankman-Fried is not optimistic.
"Since S&C pressured FTX into Chapter 11 filings, however, I worry that those pathways may have been abandoned."
Stacy Elliott
Sat, January 14, 2023
Of all the crypto bankruptcies over the past year, the FTX Chapter 11 proceeding is the only one that’s had a Department of Justice attorney assigned to represent the Internal Revenue Service.
Deputy Attorney General David Hubbert filed notice for Department of Justice trial attorney Elisabeth Bruce (replacing attorney Warren Benson, who was assigned in December) to appear in the FTX bankruptcy proceedings on Thursday.
There’s been no indication of the IRS’s exact interest in the case. A call to the IRS’s press office from Decrypt yielded a decline to comment. It’s also not clear if the agency plans to pursue its own litigation against the bankrupt crypto exchange. But the fact that it's involved at all is notable, especially given the IRS's prior interest in the customer data of major crypto exchanges such as Coinbase and Kraken.
FTX, founded by ex-CEO Sam Bankman-Fried, filed for bankruptcy on November 11. In the days leading up to its voluntary filing, the company saw billions worth of assets pulled off its crypto trading platform, was almost acquired by competitor Binance, and then froze withdrawals in a last-ditch attempt to stay afloat.
It was a sudden and spectacular downfall that caught the attention of U.S. regulators and law enforcement. Sam Bankman-Fried has since been arrested and charged with eight financial crimes. Members of his inner-circle Caroline Ellison and Gary Wang have already pleaded guilty and are cooperating with prosecutors as Bankman-Fried awaits trial.
Meanwhile, the FDIC, Federal Reserve, and Office of the Comptroller put out a joint statement two weeks ago, warning that crypto isn’t “safe and sound.” The White House has ramped up its call for regulation (while fielding questions about meetings between Bankman-Fried and President Joe Biden).
As for the IRS, Miles Fuller, TaxBit’s director of government solutions, told Decrypt that it seems the agency has more than a passing interest in the case.
Normally when debtors file for bankruptcy, those cases get assigned to an insolvency unit within the IRS, he said. The unit keeps tabs on the case and, if the IRS becomes a creditor in the proceedings, they file a proof of claim without getting lawyers involved.
He would know. Fuller spent 15 years working as an attorney at the IRS before joining TaxBit last year.
“If there was some very administrative thing that just needed to be handled, the Department of Justice's tax division is like, ‘Yeah, we don't care about that. We'll let you guys handle that,’” Fuller said. “But for any sort of really substantive tax related matter or high profile tax matter, they say, ‘No, no, we want to do that.’”
TaxBit, a tax software and crypto account firm, raised $130 million last year at a $1.3 billion valuation. That made it one of the rare startup unicorns in the middle of a not so great year for most of the crypto industry.
DOJ, IRS Target Tax-Evading Clients of Crypto Broker SFOX
Fuller said it’s possible, but a long shot, that the IRS is trying to get its hands on the customer list that FTX was given permission to keep private for another three months. If that were the agency’s interest, it wouldn’t be completely unprecedented. The IRS has issued John Doe summons seeking information on potential tax evaders to crypto firms Coinbase, Kraken, Circle, and SFOX.
Fuller suggested the IRS could also be working on guidance for how customers who have lost money in FTX, or other crypto collapses, can claim their assets at a loss without having to wait for the full bankruptcy proceeding to play out. The agency created a rule for victims of theft and Ponzi schemes in 2009 following the Bernie Madoff case.
Lisa Zarlenga, a tax attorney and partner at Steptoe & Johnson in D.C., said she’s not as optimistic about the IRS making accommodations for FTX victims.
Court Greenlights IRS Access to Kraken’s Customer Data
“You're probably still in limbo because you're gonna have to wait for the bankruptcy to play out. You could recover something, and so it's not really a closed transaction yet. They haven't actually incurred the loss,” she told Decrypt. “Some people have talked about triggering a loss by abandoning something, but can you even abandon a crypto account?”
She’s gotten the sense that most customers would prefer to wait and see what they can get from the bankruptcy, even if it means they forgo any immediate benefit. As for the IRS sending a Justice Department attorney to represent it in the case, she said her initial thought was that the agency is getting in line to file its own claim. Why? FTX—or one of its 130 entities—could owe the government money, she said.
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