The disgraced CEO of FTX Sam Bankman-Fried has broken his silence on the exchange’s fall from grace, detailing many of the ways that he was responsible for financial issues that lead to its collapse.
“I fucked up, and should have done better,” wrote Bankman-Fried in a 22-tweet-long thread.
Bankman-Fried insisted that the ongoing concerns with client funds and withdrawal issues are limited to the international arm of FTX. He added that the total amount of the exchange’s current assets and holdings are adequate to cover its debts, however the exchange still faces a liquidity crisis (a situation where an organisation runs out of available cash to return to its customers).
“The full story here is one I’m still fleshing out every detail of, but [at] a very high level, I fucked up twice,” he wrote. “A poor internal labelling of bank-related accounts meant that I was substantially off on my sense of users’ margin. I thought it was way lower.”
A series of complicated financial events, spearheaded by rival CEO Changpeng Zhao, triggered a mass of withdrawals from FTX on Sunday, with the exchange witnessing roughly US$4.5 billion worth of withdrawals in a single 24 hour period.
According to Bankman-Fried’s recent statements, FTX was only able to fulfil 80% of these requests, which created a ‘bank run’ and threw off investors’ confidence across the crypto market in general.
The ongoing liquidity crisis means that there are still many FTX customers who remain unable to access the funds stored on the exchange. SBF explained that the organisation is looking for paths forward to help get people’s money returned to them as quickly as possible.
“There are a number of players who we are in talks with, LOIs [letters of intent], term sheets, etc,” Bankman-Fried wrote. “We’ll see how that ends up.”
Major institutions have been quick to remove any exposure to FTX, dashing any hopes of a long-term recovery. Yesterday, a major venture capital firm Sequoia wrote down their US$150 million dollar investment in FTX to zero, broadly signalling that all investments in the exchange are now completely worthless.
In the last hour, crypto lender BlockFi has announced that it is pausing withdrawals, saying they are “shocked and dismayed at the situation”:
The Bahamas comes down on FTX
The headquarters of FTX are located in the Bahamas — a hotspot for large firms looking to escape the more prudent regulation of the United States.
This morning, the Securities Commission of the Bahamas took action to freeze the assets of FTX and has called in an official ‘liquidator’ that will aid FTX in selling off existing assets.
The Commission labelled FTX’s mishandling of client funds as “potentially unlawful”, stating that the “prudent course of action” was to put FTX into provisional liquidation to “preserve assets and stabilise the company.”
The US rolls out the regulation carpet
It’s not just regulators in the Bahamas that are coming down hard on FTX. While Bankman-Fried’s public statements help shed some light on what occurred and the next steps forward, it’s done little to satiate the appetite of regulators who are seeking to leverage FTX as a case study to bring the hammer down on the crypto industry.
During a press conference at the White House on Thursday, Press Secretary Karine Jean-Pierre was asked if regulators should be taking a “harder look” at the crypto world after FTX imploded.
“Without proper oversight of cryptocurrencies, they risk harming everyday Americans,” added Jean-Pierre.
Infamous whistleblower, Edward Snowden pushed back on the statements from the White House calling the US government “opportunistic serpents”.
Despite Bankman-Fried providing some much-need transparency into the operations of the beleaguered exchange, the future of FTX remains completely uncertain.
“In any scenario in which FTX continues operating, its first priority will be radical transparency – transparency it probably always should have been giving,” he added.
Interestingly, Bankman-Fried left the door open for himself, spelling out a future scenario where he may yet oversee some level of decision-making at FTX if the exchange survives, but ultimately concluded that he’ll adhere to the wishes of the community and regulators: “I will not be around if I’m not wanted.”
At the time of writing the native token of the FTX exchange, FTT has experienced significant volatility, gaining 25% in the past 24 hours. However, it remains down roughly 87% for the week. With many major institutions marking the worth of FTX down to zero, investors should approach any investment in FTT with extreme caution moving forward.