Founder of Failed Crypto Exchange FTX Apologizes to Ex-Employees | cryptocurrencies

The founder of failed crypto exchange FTX has written to his former employees apologizing for his role in its collapse, continuing to insist its demise can only be explained by a misplaced $8 billion (£6.7 billion).

In the letter, first published by industry news site CoinDesk, Sam Bankman-Fried wrote: “I deeply regret my failure to oversee. In hindsight, I wish we had done many, many things differently… I will do what I can to make it up to you – and the customers – even if it takes the rest of my life.”

However, despite mea culpa, Bankman-Fried said the company was salvageable and that if he hadn’t been pressured into filing for bankruptcy in mid-November, he could have bailed it out.

“We probably could have raised significant funds,” he wrote. “The potential interest in billions of dollars in funding came about eight minutes after I signed the Chapter 11 documents. Combined with that money, the billions of dollars of collateral the company still holds, and the interest we’ve received from other parties, I think we probably could have returned great value to customers and saved the business.

“Out of desperation came extreme coordinated pressure to declare bankruptcy for all of FTX – even for solvent companies – and despite demands from other jurisdictions … I reluctantly gave in to that pressure when I should have been better known; I wish I would have listened to those of you who saw and still see the value of the platform, which was and is my belief as well.”

In the letter, Bankman-Fried reiterated claims that FTX was a fundamentally healthy businesswhich presented a narrative of its demise that showed it with $60 billion in assets versus just $2 billion in liabilities, later this spring.

Since then, he says, two crashes in the crypto markets caused assets to plummet in value, even as more customers fled to the platform. In November, his fortune had fallen to $17 billion before “a run on the bank” resulted in $8 billion in withdrawals within days.

The coup de grace, he said, uncovered another $8 billion in liabilities from old cash deposits “before FTX had any bank accounts.” Bankman-Fried previously said in messages to Vox journalist Kelsey Piper that those debts had been forgotten for years.

They existed because the company earlier asked users to transfer funds to the bank account of the group’s hedge fund Alameda Research, where ingrained mismanagement resulted in billions of dollars in cash being held up.

Bankman-Fried didn’t directly address Alameda’s involvement in his note to employees, glossed over the source of the confusion, and didn’t mention the incendiary November bank run incident: the discovery that Alameda’s solvency was based on billions of dollars in a token , FTT, which FTX printed itself and which had no deeper value than FTX’s promise to effectively pay dividends to holders.

“I never intended that to happen,” Bankman-Fried wrote. “I was not aware of the full extent of the margin position nor the extent of the risk that a hypercorrelated crash poses.”

The exonerating story of the former CEO – who was replaced in mid-November by John J Ray III, the bankruptcy specialist who oversaw Enron’s resolution 20 years ago and has said that FTX is the worst case he has seen – was criticized by observers.

Bankman-Fried presents the company’s finances that “put everything on the market, regardless of liquidity” – assuming the vast hoards of crypto assets held by FTX can be sold at near market prices.

This assumption may apply to large markets such as Bitcoin or Ethereum. However, FTX has billions of dollars of its assets denominated in tokens like FTT and Serum, which it controls. According to a balance sheet prepared by Bankman-Fried just prior to FTX’s bankruptcy, $2.5 billion of the company’s assets consisted of tokens created by FTX that had a total market cap of a fraction of that amount.

The Delaware bankruptcy court heard Tuesday how the former chief executive had run FTX as his “personal fiefdom”.. Lawyers for the company told the court that 8% of FTX Group’s customers are based in the UK, representing around 80,000 unsecured creditors.

It is believed that most of these clients are corporate clients and investment professionals using the lightly regulated exchange FTX International to place risky leveraged bets on cryptocurrency assets.

After the collapse of FTX, the online bank became Starling announced a seven-month suspension of all customer deposits on cryptocurrency exchanges, citing the risk to consumers. The suspension will be reviewed in June 2023, the bank said.

About the author


Leave a Comment