Bankman-Fried Apologizes to FTX Employees, Details Leverage Value

FTX founder and former CEO Sam Bankman-Fried said in a letter sent Tuesday to employees that he “froze under the pressure” generated by the collapse of his former exchange.

In the document, shared internally in the company’s Slack (messaging program) and obtained by CoinDeskBankman-Fried said he felt “deeply what happened” and that he knew what the business failure meant to the firm’s employees.

He did not address allegations that FTX embezzled funds from customers and companies to support Alameda Research (the exchange’s sister company), revelations that Alameda had an exemption from FTX’s normal liquidation process, or claims that Alameda had lent funds to FTX officials, including himself.

“I didn’t want any of this to happen and I would give anything to be able to go back and do it again. You were my family,” he said. “I missed it, and our old house is an empty warehouse of prefects. When I turn around, there is no one else to talk to.”

“I froze in the face of pressure, leaks and Binance [da carta de intenção de compra da FTX] and said nothing,” he said.

Bankman-Fried stepped down as CEO of FTX on November 11, shortly before his company declared bankruptcy. He is not a current employee of the exchange, new CEO John Ray III said after Bankman-Fried tweeted several threads and spoke with a reporter about the company. The letter was posted by a current employee, as Bankman-Fried no longer has access to Slack.

According to Bankman-Fried, FTX had about $60 billion in collateral and $2 billion in liabilities in the second quarter, but a market crash meant the value of the collateral had halved.

The “drying up” of credit in the crypto industry has made the FTX guarantee worth around $25 billion, although its liability measurement has jumped to $8 billion.

Another crash in November “led to another approximately 50% decrease in the value of collateral in a very short period,” which he valued at $17 billion at the time.

The run on withdrawals, caused by what Bankman-Fried called “attacks” in November, has reduced another $8 billion in collateral, he said.

“As we frantically put everything together, it became clear that the position was higher than what was displayed (on the dashboard) by admins/users,” he said. “I didn’t realize the full extent of the margin position, nor did I realize the magnitude of risk posed by a hypercorrelated drop.”

“Secondary loans and sales were generally used to reinvest in the business – including buying Binance – and not for large amounts of personal consumption,” he said.

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Bankman-Fried did not address concerns that customer funds were sent from FTX to Alameda, which were raised again during the company’s first bankruptcy hearing on Tuesday.

James Bromley of Sullivan & Cromwell, who presented FTX’s current status at the Delaware bankruptcy hearing, said “substantial funds appear to have been transferred” to Alameda from other companies within the FTX umbrella.

“There were also substantial amounts of money that were spent on things that were unrelated to the business. For example, one of the US debtors is an operated entity that purchased nearly $300 million of real estate in the Bahamas,” said Bromley. “Based on preliminary investigations, the majority of these home purchases [estava] relating to homes and vacation properties used by senior executives”.

Still, the document provides insight into Bankman-Fried’s thinking, including his apparent belief that he should not have filed for bankruptcy, something he first told a Vox reporter last week. .

FTX filed for bankruptcy due to “an extreme amount of coordinated pressure”, which Bankman-Fried said he agreed to “reluctantly”.

“Perhaps there is still a chance to save the company,” he said in the letter. “I believe there are billions of dollars of genuine interest from new investors that could be put into making complete customers. But I can’t promise that something will happen, because it’s not my choice.”

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