FTX fiasco: Disgraced founder Sam Bankman-Fried explains crash in emotional apology to staff

In the first decade of the 21st century, Orkut was dying, Facebook was all about selfies and games, Twitter was for concise, to the point opinions. It was in that era of hope that cryptocurrencies were introduced by a mysterious inventor Satoshi Nakamoto, which promised to break the hegemony of central banks, but was soon forgotten. A decade later, Facebook has been slammed for data leaks that affected a presidential poll, Twitter is run by the agent of chaos, and the crypto market is turbulent after multiple crashes and scams.

The facade of a saviour

Among cautionary tales which have revealed the instability of a market dealing in coins secured by blockchain, is the case of FTX and its founder Sam Bankman Fried. The entrepreneur who went from trading cryptocurrencies himself to building one of the top crypto exchanges, made high profile acquisitions and emerged as a saviour of ailing firms in the sector. But behind that facade, his own company FTX was burdened by debt, and the revelation triggered mass withdrawals by clients.

FTX staff vulnerable as Binance expands

SBF’s rival and Binance founder Changpeng Zhao also dumped his entire stash of FTX’s native token FTT, causing more trouble for the exchange that came crashing down. SBF is also said to have illegally moved $10 billion from FTX to his trading firm Alameda, while $1 billion were of client funds were missing. As Binance eyes more clients along with 8000 new employees for expansion, the saviour turned weak link in the blockchain boom, SBF has apologised to his 600 employees for the debacle that has left them vulnerable.

Apology for risky decisions

While apologising for disappointing everyone, SBF wrote that his old house now resembles a deserted computer warehouse, with no one to talk to. He also apologised for freezing under pressure and not communicating the extent of the decline to employees. He also described them as his family, before going ahead to list developments that led to the eventual crash of FTX.

How collateral crashed and debt piled up

He first referred to a market crash in spring, possibly the Terra Luna crash, which dented its collateral by 50 per cent. The firm went from $60 billion to $30 billion collateral in the face of $2 billion in liabilities.

He also blamed the market bleeding credit for leaving the firm with $25 billion collateral against $8 billion in liabilities.

Finally he pinned it all on the sell off in November, triggered by what he called attacks, which brought down collateral to $9 billion against $8 billion liabilities.

Admitting failures and expressing hope

SBF finally admitted oversight failure, and wrote that he could’ve been more skeptical of borrowings with larger margins. He also added that he should’ve been more careful about fiat currencies on FTX and monitoring risks as well as assets.

Although the disgraced founder of FTX didn’t promise anything, he wrote that there’s hope for a revival, as new investors with billions of dollars are expressing interest in coming on board.

Published on: Thursday, November 24, 2022, 04:15 PM IST