Crypto Billionaire Mike Novogratz Says FTX’s Sam Bankman-Fried Will Go To Jail ‘If Facts Turn Out As I Expect’

As both CEO of Galaxy Digital Holdings and a Bitcoin maximalist, Mike Novogratz has taken many beatings from the crypto winter, and FTX’s collapse into bankruptcy is just the latest blow.

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

In response to Bankman-Fried, the New York Times DealBook Summit This Week “I’ve never tried to commit fraud,” Novogratz told Bloomberg TV Thursday, and he’s seen enough to call.

FTX ‘fraud’

“Sam and his cohorts perpetuated fraud,” Novogratz said. “They used customer money to make bets that he ‘mismanaged’ after making them.” He added that it was “a bit surprising that his lawyers let him speak”, although if FortuneJacob Carpenter noted, Bankman-Fried’s remarks are increasingly taking on a legal ring. “After watching two interviews, the word ‘delusional’ kept coming to mind. He is in a reality that is not real. A lot of narcissism, a lot of grandeur.”

“The problem was that he took our money. And so he should be prosecuted,” Novogratz said, predicting that “people go to jail and should go to jail.”

FTX imploded in spectacular fashion last month, surprising many inside and outside the crypto world. The $32 billion exchange had established itself as a leader in the field, employing top athletes and other celebrities to build its brand. Its collapse shook confidence in the cryptocurrency sector and sparked renewed calls for stricter regulation.

Bankman-Fried resigned as CEO of FTX on Nov. 11, the same day the company, along with its affiliate trading arm Alameda Research, filed for bankruptcy. That followed a liquidity crisis due to a crypto version of a bank run or the sudden realization of a massive fraud, with frantic FTX clients making $6 billion in withdrawal requests in days amid questions about the exchange’s solvency.

Risky bets

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

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

Some notable investors sided with Bankman-Fried and his 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 cage and an investor in FTX, took a similar stance, tweeting, “I lost millions as an investor in @FTX and got sandblasted as a paid spokesperson for the company, but after listening to that interview I’m in the @billAckman- camp over the child!”

Bankman Fried prosecution

But Novogratz believes Bankman-Fried “will be investigated, he will be prosecuted, and if the facts turn out as I expect, he will serve time in prison.”

But it may take a while, he added:

“I think people will ask, why isn’t the man handcuffed if he’s done something wrong? White collar crime takes a long time to get prosecuted, and you’ll see it happening more slowly than most people would like, both in terms of regulatory response and [prosecution]added Novogratz.

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

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

‘Backlash for crypto’

Bankman-Fried, whose fortune reached $26 billion during FTX’s meteoric rise, suggested this week that he is 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 replied replied“I’m trying to figure that out now.”

Novogratz called the FTX fiasco a “setback for crypto,” but he remains bullish on the industry, adding, “This too shall pass.” His company posted a $555 million loss in the second quarter, due in part to the collapse of the stablecoin terra and its companion cryptocurrency, luna. Last month it announced it would cut as much as 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 some point, and Novogratz also sees an opportunity in the current crypto decline. “There will be a lot of distressed assets,” he noted. “We’re looking at some small acquisitions.”

Fortune contacted Galaxy Digital, FTX and Bankman-Fried for comment, but did not receive an immediate response.

This story was originally on Fortune.com

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