Sam Bankman-Fried, co-founder and CEO of FTX, in Hong Kong, China on Tuesday, May 11, 2021.
Lam Yık | Bloomberg | Getty Images
Former FTX CEO Sam Bankman-Fried blamed his “irrational decisions” on “sh—y” circumstances in a letter obtained by CNBC that was sent to employees of the bankrupt crypto exchange.
Bankman-Fried said he “frozen in the face of pressure and leaks” as his crypto empire rapidly lost investor confidence and clients rapidly withdrew billions of dollars from the platform.
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“I have lost sight of the most important things in the turmoil of company growth. I care deeply about all of you, and you were my family, and I am sorry,” the letter continued.
“It’s too little too late,” a current FTX employee told CNBC. “I’ve never seen an empathetic version of Sam, so I can’t imagine he’ll change his tune now.”
Bankman-Fried did not immediately respond to a request for comment.
Bankman-Fried’s autopsy to employees outlines the ex-CEO’s perspective on the events that led to FTX’s ultimate downfall, along with some rough accounting. The crypto exchange went from a $32 billion valuation to filing for Chapter 11 bankruptcy protection in about a week.
Even though Bankman-Fried accepted blame for the course of events, he still seemed convinced he was on the verge of saving his crypto empire in the final hours before it entered chapter bankruptcy protection. 11.
“We likely could have raised significant funds; potential interest in billions of dollars in funding emerged approximately eight minutes after the Chapter 11 documents were signed,” Bankman-Fried wrote.
“Between those funds, the billions of dollars in collateral the company still held, and the interest we had received from other parties, I think we probably could have returned great value to customers and saved the company,” continues the letter.
Read Bankman-Fried’s full letter below.
Read Bankman-Fried’s full letter
I am deeply sorry for what happened. I regret what happened to you all. And I regret what happened to the customers. You gave your all for FTX and stood by the company and me.
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. I lost that, and our old house is an empty warehouse of monitors. When I turn around, there’s no one to talk to. I let you all down, and when things broke down, I failed to communicate. I froze at the pressure and the leaks and the letter of intent from Binance and said nothing. I lost track of the most important things in the hustle and bustle of business growth. I care deeply about all of you, and you were my family, and I’m sorry.
I was CEO, so it was my job to make sure that, ultimately, the right things happened at FTX. I wish I had been more careful.
I want to give you a better description of what happened – a description that I should have written as best I understood it much earlier.
Putting things together recently, making approximations – I don’t have access to all the data right now to get precise answers – and marking everything in the market regardless of liquidity, I think events that led to the outage this month included:
1) A crash in the markets this spring that led to a reduction of around 50% in the value of collateral;
a. ~$60 billion in guarantees, ~2 billion in liabilities -> ~$30 billion in guarantees, ~2 billion in liabilities
2) Most credit in industry suddenly dries up;
a. ~$25 billion in collateral, ~$8 billion in liabilities
3) A concentrated, hyper-correlated crash in November that caused a further reduction of around 50% in the value of collateral over a very short period of time, during which there was very little supply-side liquidity on the market ;
a. ~$17 billion in collateral, ~$8 billion in liabilities
4) A rush on the bank triggered by the same attacks in November;
a. ~$9 billion guarantee
5) As we frantically put everything together, it became clear that the position was bigger than its display on admins/users, due to old escrows before FTX had bank accounts:
a. ~$9 billion in collateral, ~$8 billion in liabilities
I never wanted this to happen. I did not realize the full extent of the margin position, nor the magnitude of the risk posed by a hyper-correlated crash. Loans and secondary sales were generally used for reinvesting in the business, including buying out Binance, and not for large amounts of personal consumption.
I deeply regret my failure to supervise. Looking back, I wish we had done a lot of things differently. To name a few:
a) be much more skeptical of large margin positions
b) examine stress test scenarios involving hypercorrelated crashes and simultaneous bank runs
c) pay more attention to fiat processes on FTX
d) have continuous monitoring of total deliverable assets, total client positions and other basic risk measures
e) Implement more controls around the management of margins.
And none of that changes the fact that it all sucks for you guys, and it’s not your fault, and I’m so sorry about that. I will do what I can to make it up to you and the customers, even if it takes the rest of my life. But I’m afraid I can’t do it.
I also want to thank those of you who gave me what I now believe to be the correct advice on the paths forward for FTX after the crash. You were right, of course: I think a month ago FTX was a thriving, profitable and innovative business. Which means FTX still had value, and that value could have helped make everyone more whole. We probably could have raised significant funds; potential interest in billions of dollars in funding came about eight minutes after I signed the Chapter 11 paperwork. Between those funds, the billions of dollars in collateral the company still held and the interest we had received from other parts, I think we probably could have returned great value to customers and saved the business.
There should have been changes, of course: a lot more transparency and a lot more controls in place, including monitoring myself. But FTX was something really special, and you all helped make it happen. Nothing that happened was your fault. We had to make very tough calls very quickly. I’ve been in this situation before and I should have known that when shitty things happen to us, we all tend to make irrational decisions. Extreme coordinated pressure came, in desperation, to file for bankruptcy on all of FTX – even solvent entities – and despite claims from other jurisdictions. I understand this pressure and I sympathize with it; many people had been thrown into difficult circumstances that were usually not their fault. I reluctantly gave in to this pressure, even though I should have known better; I would have liked to hear from those of you who have seen and still see the value of the platform, which was and is also my belief.
Maybe there is still a chance to save the company. I believe there are billions of dollars of real interest from new investors that could be used to make customers whole. But I can’t promise you that anything will happen, because it’s not my choice. In the meantime, I’m glad to see some positive steps being taken, like the reactivation of LedgerX.
I’m incredibly grateful for everything you’ve done for FTX over the years, and I’ll never forget it.
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