Sam Bankman-Fried ‘I am deeply sorry’ in letter to former FTX employees

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Sam Bankman-Fried, the founder and former CEO of FTX Trading, this week apologized to employees in an internal letter explaining why the cryptocurrency exchange under his command failed. According to the letter, Bankman-Fried said he “froze under pressure and leaks” and said nothing during the beginning of FTX’s collapse. Public trouble for FTX began over the weekend of November 7, when Binance CEO Changpeng Zhao announced plans to liquidate the exchange’s shares of FTT, FTX’s native crypto token.

That news came after leaked documents revealed that FTX and its sister company Alameda Research were unusually entangled and how loans of FTT tokens were involved.

The liquidation announcement sparked rumors of FTX’s insolvency, which in turn sparked a run on the crypto exchange by users seeking to withdraw their assets. Soon, FTX entered a liquidity crisis and withdrawals faltered. Binance reached out with a “letter of intent” to acquire FTX to resolve the crisis, but quickly backtracked after reviewing the company’s books with Zhao stating that the exchange was beyond saving.

“I didn’t mean for all of this to happen, and I would give anything to be able to go back and do things again. You were my family,” Bankman-Fried wrote in the letter that was acquired first by those at CoinDesk. “I lost that, and our old house is an empty warehouse with monitors. When I turn around, there’s no one left to talk to.”

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The letter was shared on the company’s internal Slack server. Since Bankman-Fried is no longer an employee of the company, he no longer has access to the chat and the letter was shared by a current employee.

According to the letter, FTX had about $60 billion (approximately Rs. 4,87,100 crore) and $2 billion (approximately Rs. 16,230 crore) in liabilities in the spring, but the market crash reduced its value by half. He said collateral for the company fell to about $25 billion (about Rs. 2,02,950 crore) while liabilities quadrupled to $8 billion (about Rs. 64,940 crore). Yet another “concentrated, hypercorrelated” crash in November led to collateral falling to $17 billion (approximately Rs. 1,38,010 crore). And finally, he said, the “run on the bank” caused by “the same attacks” ended with $9 billion (approximately Rs. 73,060 crore) collateral.

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“As we frantically put everything together, it became apparent that the position was larger than the view on admin/users, due to old fiat deposits before FTX had bank accounts,” Bankman-Fried wrote. “I didn’t realize the full magnitude of the margin position, nor did I realize the magnitude of the risk of a hypercorrelated crash.”

He added that there was extreme pressure to “make hard decisions very quickly” when the collapse started and that he had made irrational decisions as a result. He seems to regret the bankruptcy as some of the FTX entities he claims were solvent, and believes he could have saved the company even as it was in its death throes.

“From desperation came an extreme amount of coordinated pressure to file for bankruptcy for all of FTX — even entities that were solvent — and despite the claims of other jurisdictions,” he wrote. “We probably could have raised significant funding; potential interest in billions of dollars in funding came within about eight minutes of me signing the Chapter 11 filings. Between those funds, the billions of dollars in collateral the company still had, and the interest that we’d received from other parties, I think we probably could have returned a lot of value to customers and saved the business.”

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While the letter outlines FTX’s demise and comments on where the money went and why the collapse occurred during his tenure, it did not address some of the more controversial aspects of his command. These include, for example, allegations that FTX has lent money from customers to its sister company Alameda Research, or the leaked documents that revealed the close relationship between the two companies regarding the FTT tokens.

In his conclusion, Bankman-Fried states that he hopes that FTX can still be saved. “Maybe there is still a chance to save the company,” he said. “I believe there are billions of dollars of genuine interest from new investors that could go into making customers healthy. But I can’t promise you anything will happen because it’s not my choice.”


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