Nov 22, 2022
Bankman-Fried Says Collateral Crashed by $51 Billion as FTX Fell
(Bloomberg) -- Sam Bankman-Fried, disgraced founder of the now collapsed crypto exchange FTX and trading house Alameda Research, apologized to staff in a letter that outlined a crash in “collateral” to $9 billion from $60 billion.
“I didn’t mean for any of this to happen, and I would give anything to be able to go back and do things over again,” he wrote in the message sent to employees Tuesday and obtained by Bloomberg News.
A slide in digital-asset markets in spring roughly halved collateral to $30 billion, while liabilities were $2 billion, he said.
A combination of a credit squeeze, a further selloff in virtual coins and a “run on the bank” left collateral at $9 billion ahead of FTX’s Nov. 11 bankruptcy, he wrote. The estimate for liabilities had reached $8 billion by then, he said.
“I did not realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by a hyper-correlated crash,” Bankman-Fried said. He didn’t give exact details on the makeup of the collateral or the liabilities.
FTX and Alameda Research, both onetime pillars of the crypto market, unraveled with astonishing speed this month. Flows of money between a tangled web of FTX-related entities are at the heart of whether the exchange misappropriated customer funds.
The bankruptcy proceedings so far have painted a picture of a business with unusually lax documentation and financial controls, with payment requests approved by emojis in chatrooms and FTX funds used to buy homes and other personal items for employees and advisers.
Bankman-Fried wrote that “potential interest in billions of dollars of funding came in roughly eight minutes after I signed the Chapter 11” documents.
While he argued that could have helped save FTX and return “large value” to customers, the court filings point to a chaotic organization with deep problems.
Here’s a copy of Bankman-Fried’s letter:
For crypto market prices: CRYP; for top crypto news: TOP CRYPTO.
©2022 Bloomberg L.P.