SBF sent a new collapse reason letter to FTX employees. FTX founder Sam Bankman-Fried explained why crypto exchanges failed in a new letter. Bankman-Fried thinks there is still room to save FTX. FTX founder Sam Bankman-Fried has apologized to his colleagues and explained why the crypto exchange failed in a new letter.
The letter, sent on Tuesday and reviewed by Block, said that a series of events led to the failure of FTX. It started with the stock market crash in the spring, followed by a “freeze” of credit, and ended with consumers withdrawing their money in droves, Bankman-Fried said. In addition to these issues, FTX’s poor management and risk management ultimately led the company to file for bankruptcy, according to the letter. “I never wanted this to happen. I did not fully understand the extent of the extreme situation, or the magnitude of the risk of a hyper-correlated crash,” Bankman-Fried said in the letter. “Secondary loans and sales are often used for reinvestment in businesses – including buying Binance – and not for large personal consumption.”
According to Bankman-Fried (SBF), FTX had about $60 billion in contracts and $2 billion in debt this spring, but the stock market crash reduced the value of those contracts. The elimination of credit in the company means that the FTX contract is worth about $25 billion, although their debt is about $8 billion. Another crash in November led to another drop of about 50% in the value of the contract in a short period of time, to $17 billion at that time. Then, the bank run, caused by what Bankman-Fried called an “attack” in November, reduced the deal to $9 billion, he said. “As we bravely put everything together, it became clear that the situation was much bigger than posted with admins/employees, due to old escrows before FTX had a bank account,” the letter reads. . “I don’t fully understand the magnitude of the situation, or the magnitude of the risk of an accident associated with it.”
SBF explained the reasons in the FTX collapse
Bankman-Fried did not allege that FTX borrowed client funds from its trading firm, Alameda Research, to cover its debt in the letter. It also doesn’t explain why consumer finance is backed by the wrong standards instead of just holding it as it is.
SBF said he was “deeply sorry for what happened” and was forced to file for bankruptcy, which he appeared to regret. The letter reads, “Strong collective pressure has come, out of desperation, to file for bankruptcy for all of FTX – even the smelter – and despite statements from other jurisdictions.” “Maybe we would have raised a lot of money; the interest could be billions of dollars and the money came about eight minutes after I signed the 11th document. Between those funds, the billions of dollars in contracts the company still has, and the interest we’ve received from other parties, I think we can return significant profits to customers and save the company.”
Despite the bankruptcy process, Bankman-Fried (SBF) still believes there is room to save FTX. “I believe that there are billions of dollars of good interest from new investors that can be used to make the market perfect. But I can’t promise you that anything will happen because it’s not my choice,” he said in the letter.
Sam Bankman-Fried (SBF) resigned as CEO of FTX on November 2. 11 and is not currently an employee of the company. He will not have access to the company’s Slack account, but the message will be shared with other employees from the current user.