FTX founder and CEO Sam Bankman-Fried broke his silence on Thursday morning with a lengthy statement taking responsibility for financial irregularities at the exchange and its subsequent collapse.
In a thread on Twitter, the founder gave the fullest explanation yet of the unexpected crisis that has all but destroyed his company.
“I fucked up, and should have done better,” Bankman-Fried said. “I also should have been communicating more very recently.”
In the following explanation, the CEO insisted the problems are limited to FTX’s international arm (which is not subject to US banking regulations). Even within FTX International, Bankman-Fried says total holdings are sufficient to satisfy the company’s debts. However, he acknowledged that the exchange is experiencing a liquidity crisis, leaving customers unable to retrieve money they’ve entrusted to the exchange.
“A poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users’ margin. I thought it was way lower,” the CEO wrote.
When a complex string of events triggered mass sales on Sunday, the exchange saw roughly $5 billion worth of withdrawals in a day. According to Bankman-Fried, FTX International was only able to fulfill 80 percent of those requests, resulting in a run on the bank and a broader crisis of confidence in the company’s infrastructure.
“And so we are where we are,” Bankman-Fried concluded. “Which sucks, and that’s on me. I’m sorry.”
6) My sense before:
Leverage: 0x
USD liquidity ready to deliver: 24x average daily withdrawals
Actual:
Leverage: 1.7x
Liquidity: 0.8x Sunday’s withdrawals
Because, of course, when it rains, it pours. We saw roughly $5b of withdrawals on Sunday–the largest by a huge margin.
— SBF (@SBF_FTX) November 10, 2022
Bankman-Fried was one of the most successful figures of the cryptocurrency boom, with personal wealth exceeding $20 billion at its peak. The past two weeks have seen a huge portion of that wealth evaporate, as plummeting prices led to an immediate and unexpected crisis in filling orders.
A recent report from Sequoia Capital marked FTX’s worth down to zero, labeling investments in the exchange as essentially worthless. The company had previously been valued at as much as $32 billion.
FTX’s collapse has been exacerbated by a short-lived takeover attempt from rival exchange Binance, which would have provided the company with the necessary liquidity to cover the flood of withdrawals. But after making the surprise offer on Tuesday, Binance founder Changpeng “CZ” Zhao abruptly withdrew the following day, citing “corporate due diligence, as well as the latest news reports regarding mishandled customer funds.”
The crisis has also enveloped Bankman-Fried’s trading firm Alameda Research, which is deeply entangled with FTX. Alameda is now “winding down trading,” Bankman-Fried also said.
The ongoing liquidity issues mean there are still FTX users who have been unable to retrieve their funds, and the remaining FTX organization is hoping money can be raised to make those users whole. “There are a number of players who we are in talks with, LOIs, term sheets, etc,” Bankman-Fried wrote. “We’ll see how that ends up.”
Even so, the exchange’s future remains uncertain at best. “In any scenario in which FTX continues operating, its first priority will be radical transparency — transparency it probably always should have been giving,” he continued. “I will not be around if I’m not wanted.”