Tuesday, September 26, 2023

‘I fucked up,’ says FTX founder Sam Bankman-Fried in public apology

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FTX founder and CEO Sam Bankman-Fried broke his silence Thursday morning with a lengthy statement taking responsibility for financial irregularities at the stock exchange and its subsequent collapse.

In a thread on Twitter, the founder gave the most complete explanation yet of the unexpected crisis that has virtually destroyed his company.

“I screwed up, and should have done better,” said Bankman-Fried. “I should have communicated more lately, too.”

In the following explanation, the CEO emphasized that the problems are limited to the international arm of FTX (which is not subject to US banking regulations). Even within FTX International, Bankman-Fried says the total assets are sufficient to meet the company’s debts. However, he acknowledged that the exchange is going through a liquidity crisis, which means that clients are unable to get back money they have entrusted to the exchange.

“Due to poor internal labeling of bank-related accounts, I was quite wrong in my sense of user margin. I thought it was much lower,” the CEO wrote.

When a complex series of events led to massive sales on Sunday, the exchange saw about $5 billion in withdrawals in one day. According to Bankman-Fried, FTX International was only able to grant 80 percent of those requests, resulting in a run on the bank and a wider crisis of confidence in the company’s infrastructure.

“And so we are where we are,” concluded Bankman-Fried. ‘That sucks, and that’s just me. My apologies.”

Bankman-Fried was one of the most successful figures of the cryptocurrency boom, with a personal fortune of more than $20 billion at its peak. The past two weeks have seen much of that wealth evaporate as plummeting prices led to an immediate and unexpected order fulfillment crisis.

A recent report from Sequoia Capital marked the value of FTX to zero, and labeled investments in the stock market as essentially worthless. The company was previously valued at a whopping $32 billion.

FTX’s collapse has been exacerbated by a short-lived takeover attempt by rival exchange Binance, which allegedly provided the company with the necessary liquidity to cover the flow of withdrawals. But after making the surprise offer on Tuesday, Binance founder Changpeng “CZ” Zhao withdrew abruptly the next day, citing “corporate due diligence, as well as the latest news about mishandled client funds.”

The crisis has also enveloped Bankman-Fried’s trading firm Alameda Research, which is deeply entangled in FTX. Alameda is “ending trading now,” Bankman-Fried also said.

The ongoing liquidity problems mean that there are still FTX users who haven’t been able to collect their money, and the remaining FTX organization hopes that money can be raised to make those users whole. “There are a number of players we are talking to, LOIs, termsheets, etc.” Bankman-Fried wrote. “We’ll see how that turns out.”

Still, the future of the stock market remains uncertain at best. “In any scenario where FTX continues to operate, the first priority will be radical transparency — transparency it probably should have always given,” he continued. “I won’t be there if I’m not wanted.”

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