February 9, 2023

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FTX ex-CEO Sam Bankman-Fried blamed his “irrational decision” on “sh—y” circumstances in a letter obtained by CNBC that was sent to employees of the bankrupt crypto exchange.

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Bankman-Fried said he “frozen in the face of pressure and leaks” as his crypto empire quickly lost investor confidence and customers swiftly withdrew billions of dollars from the platform.

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“I lost track of the most important things in the hustle and bustle of the company’s growth. I care about all of you very much, and you were my family, and I’m sorry,” the letter continued.

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“It’s too late,” a current FTX employee told CNBC. “I’ve never seen a sympathetic version of Sam, so I can’t imagine he’ll change his tune now.”

Bankman-Fried did not immediately respond to a request for comment.

The Bankman-Fried post-mortem for employees outlines the ex-CEO’s opinion on the events that led to the eventual downfall of FTX, along with imputed accounting. The cryptocurrency exchange went from a $32 billion valuation to filing for Chapter 11 bankruptcy protection in about a week.

Even as Bankman-Fried accepted blame for the course of events, he appeared confident that he was close to saving his crypto empire in the final hours before entering Chapter 11 bankruptcy protection.

Bankman-Fried wrote, “It’s possible we could have raised significant funding; potential interest in billions of dollars in funding came about eight minutes after the Chapter 11 docs were signed.”

“Between those funds, the company still has billions of dollars in collateral, and given the interest we have received from other parties, I think we probably could have returned greater value to customers and saved the business,” the letter continued. kept.

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Read Bankman-Fried’s full letter below.

Read the full Bankman-Fried letter

“Greetings-

I am deeply sorry for what happened. I’m sorry what happened to all of you. And I’m sorry about what happened to the customers. You gave everything you could for FTX, and stood by the company—and me.

I didn’t mean any of this to happen, and I would give anything to be able to go back and work again. you were my family I’ve lost that, and our old house is an empty warehouse of monitors. When I turn around, there’s no one left to talk to. I let you all down, and I failed to communicate when things broke down. I froze in the face of the pressure and the leaks and the Binance LOI and said nothing. In the commotion of growing the company, I lost track of the most important things. I care about all of you so much, and you were my family, and I am sorry.

I was the CEO, and so it was my duty to make sure that, ultimately, the right things were done at FTX. I wish I had been more careful.

I’d like to give you a better description of what happened—one that I should have best written had I realized it long ago.

Putting things together recently, speculating—I don’t have full data access right now to get an exact answer—and marking everything to market regardless of liquidity, I believe the breakdown this month Causative events include:

1) The fall in the market this spring resulted in a nearly 50% reduction in the value of the collateral;

One. ~$60b collateral, ~$2b liabilities -> ~$30b collateral, ~$2b liabilities

2) most loans in the industry dry up at once;

One. ~$25b collateral, ~$8b liabilities

3) a concentrated, hyper-correlated crash in November that caused the value of collateral to fall by almost 50% in a very short period of time, during which market bid-side liquidity was very low;

One. ~$17b collateral, ~8b liabilities

4) A run on the bank began with similar attacks in November;

One. ~$9b collateral

5) As we frantically put everything together, it became clear that the position was larger than it displayed on admin/users, as FTX had old fiat deposits before the bank account:

One. ~$9B collateral, ~$8B liabilities

I never intended this to happen. I didn’t realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by the hyper-correlated crash. The loans and secondary sales were generally used to reinvest in the business – which included the Binance purchase – and not for personal consumption in large amounts.

I am deeply sorry for my oversight failure. In retrospect, I wish we had done a lot of things differently. to name a few:

a) being overly suspicious of large margin positions

b) Testing stress test scenarios involving highly correlated crashes and simultaneous bank runs

c) Being more careful about fiat procedures on FTX

d) Continuous monitoring of total deliverable assets, total customer position and other key risk metrics

e) Having more control around margin management.

And none of that changes the fact that this all sucks for you guys, and it’s not your fault, and I’m really sorry for that. I’m going to do what I can for you guys – and customers – even if it takes the rest of my life. But I am worried that even then I will not be able to do it.

I also want to acknowledge those of you who gave me what I now believe to be the correct advice regarding the way forward for FTX after the crash. Of course you were right: I believed that a month ago FTX was a thriving, profitable, innovative business. Which means FTX still had value, and that value could go towards helping everyone become more whole. We could potentially raise significant money; The potential interest in the billion-dollar funding came about eight minutes after the Chapter 11 documents were signed. Between those funds, the company still has billions of dollars in collateral, and given the interest we’ve received from other parties, I think we probably could have returned great value to customers and saved the business.

Certainly there should have been changes: more transparency, more control, including self-monitoring. But FTX was really something special, and you all helped make it. Whatever happened was not your fault. We had to make very tough calls very quickly. I’ve been in that position before, and I should have known that we all make irrational decisions when bad things happen to us. An enormous amount of coordinated pressure came from desperation for all FTX—even the solvent entities—and to file for bankruptcy despite claims from other jurisdictions. I understand and sympathize with that pressure; Too many people were thrust into challenging situations, usually through no fault of theirs. I reluctantly succumbed to that pressure, even though I should have known better; I wish I had listened to those of you who saw and still see value in the platform, which was and is my belief as well.

Perhaps there is still a chance to save the company. I believe there are billions of dollars in real interest from new investors that could go into perfecting customers. But I can’t promise you that anything will happen, because it’s not my choice. In the meantime, I’m excited about some positive steps being taken, such as the reopening of LedgerX.

I am incredibly grateful for everything you guys have done for FTX over the years, and I will never forget that.

—sbf”

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