The cryptocurrency exchange founder says his empire could have survived.
Sam Bankman-Fried will not stay silent, despite lawsuits from aggrieved customers and investigations from regulators.
The founder of the cryptocurrency exchange FTX is determined to give his version of his downfall at all costs. After having publicly apologized a few days ago, he just issued his mea culpa to his former employees.
The most surprising statement in this apology letter, dated November 22, is when the former trader says that he regrets having filed for Chapter 11 bankruptcy for his empire, made up of FTX and Alameda Research, a hedge fund also operating as a trading platform.
He claimed to have been under a lot of pressure to file for bankruptcy and to have yielded to it, but does not say where this pressure came from.
“An extreme amount of coordinated pressure came, out of desperation, to file for bankruptcy for all of FTX- even entities that were solvent – and despite other jurisdictions’ claims,” Bankman-Fried wrote in his letter, reviewed by TheStreet. “I understand that pressure and empathize with it; a lot of people had been thrust into challenging circumstances that generally were not their fault.”
“I reluctantly gave in to that pressure, even though I should have known better; I wish I had listened to those of you who saw and still see value in the platform, which was and is my belief as well.”
Bankman-Fried does not specify who exerted this pressure on him and in what form.
You can read the FTX collapse timeline here.
‘There Still Is a Chance’
Bankman-Fried claimed that FTX could have avoided filing for bankruptcy. He says that there was investor interest to bail out the group, which required to close an $8 billion hole to satisfy the demands of its panicked customers withdrawing their money.
“We likely could have raised significant funding; potential interest in billions of dollars of funding came in roughly eight minutes after I signed the Chapter 11 docs,” the former “emperor” of crypto said.
“Between those funds, the billions of dollars of collateral the company still held, and the interest we’d received from other parties, I think we probably could have returned large value to customers and saved the business.”
He doesn’t stop there. He still believes it’s not too late.
“Maybe there still is a chance to save the company,” Bankman-Fried wrote. “I believe that there are billions of dollars of genuine interest from new investors that could go to making customers whole. But I can’t promise you that anything will happen, because it’s not my choice.”
What Bankman-Fried fails to say, however, is that, even if FTX had been bailed out, the group had already lost the trust of its customers and investors. There was a general feeling of suspicion that had caused a run on the bank. In the financial industry, suspicion and loss of trust are two things that very few institutions can survive.
Court documents produced this week by Alvarez & Marsal North America, one of the advisers hired to help restructure Sam Bankman-Fried’s crypto empire, showed that the cryptocurrency exchange and a number of its affiliates had $1.24 billion in cash on the balance sheet when the firm filed for bankruptcy.
Alameda Research had nearly $401 million on its balance sheet, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.
FTX Owes $3 Billion to Top Creditors
FTX recently revealed that its top 50 creditors are seeking $3 billion in claims. The insolvent company released the amount of the claims for each of its top creditors but did not name them or disclose any information about their headquarters.
In his letter to his former employees, Bankman-Fried does not respond to a scathing criticism from new FTX CEO John Ray and attorney James Bromley, co-head of the restructuring practice at law firm Sullivan & Cromwell.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray wrote in a 30-page document filed with the United States Bankruptcy Court for the District of Delaware. “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
Bromley drove the point home: “We have probably witnessed one of the most abrupt and difficult corporate collapses in the history of corporate America,” Bromley told a Delaware bankruptcy court during a court hearing on November 22.