Bankman-Fried Apologizes to FTX Employees, Details Amount of Leverage in Internal Letter
FTX founder and former CEO Sam Bankman-Fried "froze up in the face of pressure" as his company collapsed, he wrote in a new letter sent to employees of the company he once helmed.
In the letter, shared internally in FTX's company Slack and obtained by CoinDesk, Bankman-Fried said he felt "deeply sorry about what happened" and what that meant for the company's employees. He did not address allegations that FTX diverted customer and corporate funds to prop up Bankman-Fried's Alameda Research, revelations that Alameda had an exemption from FTX's normal liquidation process or statements that Alameda had loaned funds to FTX officials including himself.
"I didn't mean for any of this to happen, and I would give anything to be able to go back and do things over again. You were my family," he said. "I've lost that, and our old home is an empty warehouse of monitors. When I turn around, there's no one left to talk to."
"I froze up in the face of pressure and leaks and the Binance [letter of intent to purchase FTX] and said nothing," he said.
Bankman-Fried stepped down as CEO of FTX on Nov. 11, right before his company filed for bankruptcy. He is not a current employee of the company, new CEO John Ray III has said after Bankman-Fried tweeted multiple threads and spoke to a reporter about the company. Tuesday's letter to FTX employees was posted by a current employee, as Bankman-Fried no longer has access to the company Slack.
According to Bankman-Fried, FTX had around $60 billion in collateral and $2 billion in liabilities this spring, but a market crash meant the collateral's value was halved.
The "drying up" of credit in the industry further meant FTX's collateral was worth around $25 billion, though his liabilities measurement jumped to $8 billion.
Another crash in November "led to another roughly 50% reduction in the value of collateral over a very short period of time," which he valued at $17 billion at the time.
The bank run, caused by what Bankman-Fried termed "attacks" in November, reduced another $8 billion in collateral, he said.
"As we frantically put everything together, it became clear that the position was larger than its display on admin/users, because of old fiat deposits before FTX had bank accounts," he said. "I did not realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by a hyper-correlated crash."
Bankman-Fried "did not realize the full extent of the margin position" or the risk that a correlated crash meant, he said.
"The loans and secondary sales were generally used to reinvest in the business – including buying out Binance – and not for large amounts of personal consumption," he said.
Bankman-Fried did not address concerns that customer funds were sent from FTX to Alameda, which were raised anew during the company's first bankruptcy hearing earlier Thursday.
James Bromley of Sullivan & Cromwell, who presented FTX's current state of affairs at the hearing, said "substantial funds appear to have been transferred" to Alameda from other companies within the FTX umbrella, some of which were invested in crypto and technology ventures.
"There were also substantial amounts of money that were spent on things that were not related to the business. For instance, one of the U.S. debtors is a an entity that is operated that purchased almost $300 million worth of real estate in the Bahamas," Bromley said. "Based on preliminary investigations, most of those real estate purchases [were] related to homes and vacation properties that were used by senior executives."
Still, the document provides insight to Bankman-Fried's thinking, including his apparent belief that he should not have filed for Chapter 11 bankruptcy, which he first told a Vox reporter last week.
FTX filed for bankruptcy due to "an extreme amount of coordinated pressure," which Bankman-Fried said he agreed to "reluctantly."
"Maybe there is still a chance to save the company," he said in the letter Tuesday. "I believe that there are billions of dollars of genuine interest from new investors that could go to making customers whole. But I can't promise you that anything will happen, because it's not my choice."
Danny Nelson contributed reporting.