Crypto Billionaire Mike Novogratz Says FTX’s Sam Bankman-Fried Will Go to Jail “If Things Go My Way”

As CEO of Galaxy Digital Holdings and Bitcoin maximalist, Mike Novogratz has taken many hits from the cryptocurrency winter, and the FTX bankruptcy is just the latest blow.

Last month, Novogratz’s crypto financial services firm disclosed a $76.8 million exposure to FTX, while this year Novogratz has lost 64% of its net worth, which is now down to 1.8 billion dollars, according to the Bloomberg Wealth Index.

After Bankman-Fried told the New York Times This Week’s DealBook Summit “I’ve never tried to commit fraud,” Novogratz spoke Thursday with Bloomberg TV and saw enough to make a call.

FTX ‘fraud’

“Sam and his cohorts have been perpetuating a fraud,” Novogratz said. “They used clients’ money to make bets that he ‘mismanaged risk’ after making them.” He added that it was “a little surprising that his lawyers let him speak,” although as Fortuneobserved Jacob Carpenter, Bankman-Fried’s comments increasingly have a legal ring. “After watching two interviews, the word ‘delusional’ kept coming to my mind. It is in a reality that is not real. A lot of narcissism, a lot of grandiosity.”

“The problem is, he took our money. And so it has to be prosecuted,” Novogratz said, predicting that “people are going to go to jail and they should go to jail.”

FTX exploded spectacularly last month, surprising many inside and outside the cryptocurrency world. The $32 billion exchange had established itself as a leader in the industry, having enlisted star athletes and other celebrities to build its brand. Its collapse has shaken confidence in the cryptocurrency industry and sparked new calls for stricter regulation.

Bankman-Fried resigned as CEO of FTX on Nov. 11, the same day the company, along with affiliated trading arm Alameda Research, filed for bankruptcy. This followed a liquidity crunch resulting from either a crypto version of the bank run or the sudden realization of a massive fraud, with frantic FTX clients requesting $6 billion in withdrawals within days amid questions about the bank’s creditworthiness. exchange.

Risky bets

A key allegation leveled against Bankman-Fried is that he used client funds from his cryptocurrency exchange to fund risky bets at Alameda Research.

“I’ve never tried to defraud anyone,” Bankman-Fried told the DealBook summit (note the word “try”). He added that he was excited about the prospects for FTX just a month ago, which he saw as a thriving and growing business. “I was shocked by what happened this month. And rebuilding it, there are things I wish I had done differently… I clearly made a lot of mistakes».

Some major investors sided with Bankman-Fried and her apparent incompetence defense this week. Bill Ackman, the billionaire founder of hedge fund Pershing Square Capital Management, tweeted Wednesday: “Call me crazy, but I think @sbf is telling the truth.”

Kevin O’Leary, a star of the TV show Shark tank and an investor in FTX, took a similar stance, tweeting: “I’ve lost millions as an investor in @FTX and been sandblasted as a paid spokesperson for the company but after hearing that interview I’m in the @billAckman camp on the guy !”

Prosecutor Bankman-Fried

But Novogratz believes Bankman-Fried “will be investigated, he will be prosecuted and if things go as I expect, he will spend time in prison.”

But that could take some time, he added:

“I think people will ask, why isn’t the guy in handcuffs if he did something wrong? White collar crime takes a long time to prosecute and you will see this happening more slowly than most people would like, both the regulatory response and [prosecution]”, added Novogratz.

Last week, billionaire Dallas Mavericks owner Mark Cuban told TMZ that Bankman-Fried should be concerned about jail time.

“I don’t know all the details, but if I were him, I’d be afraid of going to jail for a long time,” he said. “It sure sounds bad. I actually talked to the guy and thought he was smart, but boy, I had no idea that he would, you know, take other people’s money and use it for his own use. Yes, of course… it looks like what happened.

“A setback for cryptocurrencies”

Bankman-Fried, whose fortune reached $26 billion during FTX’s rapid rise, hinted this week that he’s struggling with finances. On Monday, he told Axios that he only had $100,000 in his bank account. At the DealBook summit, he said he had “almost nothing” left. And when asked how he paid his lawyers during a Twitter space hosted by Mario Nawfal, he he answered“It’s something I’m trying to figure out right now.”

Novogratz called the FTX fiasco a “setback for cryptocurrencies,” but remains optimistic about the industry, adding, “This too shall pass.” His firm posted a $555 million loss in the second quarter, due in part to the collapse of stablecoin terra and related cryptocurrency, luna. Last month it announced it would cut up to 20% of its global workforce and posted a loss of $68.1 million for the third quarter.

But Galaxy, currently listed in Canada, remains committed to a Nasdaq listing at one point, and Novogratz also sees some opportunity in the current cryptocurrency crisis. “There will be a lot of distressed assets,” she noted. “We’re looking at some small acquisitions.”

Fortune reached out to Galaxy Digital, FTX and Bankman-Fried for comment but received no immediate responses.

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