Sam “SBF” Bankman-Fried, the founder and former CEO of the now-bankrupt cryptocurrency exchange FTX, stated that his “biggest mistake” during the $8 billion collapse was delegating control of the company to new management — a choice he claims cost him a last-minute chance to save the business.
Once head of the $32 billion FTX exchange, Bankman-Fried is currently serving a 25-year prison term for seven felony charges associated with the November 2022 downfall of FTX and Alameda Research, which led to an $8.9 billion loss in investor assets.
Reflecting on FTX’s collapse, Bankman-Fried cited handing leadership over to the current CEO, John J. Ray III, on Nov. 11, 2022, as his “biggest mistake.”
“The most significant error I made was definitely handing the company over,” SBF remarked in an interview with Mother Jones published on Friday.
Shortly after transferring control of the crypto exchange, Bankman-Fried received a call about a possible external investment that might have prevented the company’s bankruptcy, but he claimed it was too late to retract his signature.
After his appointment as CEO, Ray filed for Chapter 11 bankruptcy on Nov. 11, 2022, and engaged law firm Sullivan & Cromwell (S&C) for support in the proceedings.
Bankman-Fried was arrested in the Bahamas on Dec. 12, 2022, following the filing of criminal charges against him by US prosecutors. He was extradited to the US in January 2023.
The collapse of FTX stemmed from the misappropriation of user funds, resulting in significant trading losses for Alameda Research. The quantitative trading firm utilized FTX customer funds transferred by Bankman-Fried without authorization to cover Alameda’s trading deficits, now referred to as the Alameda gap.
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Sullivan & Cromwell advised Ray as new FTX CEO to SBF
Two days prior to FTX’s bankruptcy filing on Nov. 9, S&C attorney Andrew Dietderich contacted Bankman-Fried with a plan suggesting the hiring of Ray as a chief restructuring officer “in a potential Chapter 11.”
On Feb. 16, 2024, a group of FTX creditors filed a lawsuit against the law firm, alleging their involvement in FTX’s multibillion-dollar fraud and the financial gains the company received from it. The lawsuit, which sought damages for aiding and abetting fraud and breach of fiduciary duty, was voluntarily withdrawn in October 2024.
S&C garnered over $171.8 million in legal fees from the FTX bankruptcy by June 27, 2024, as revealed by legal documents analyzed by Reuters.
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FTX users are still waiting on over $4.2 billion in repayments
Nearly three years post-collapse, FTX creditors are still anticipating complete repayment.
The FTX estate commenced repayments to creditors in February with a $1.2 billion disbursement, followed by a $5 billion distribution in May. With the payment in September, the exchange has reimbursed a total of $7.8 billion to creditors.
FTX is estimated to have as much as $16.5 billion in recovered assets available for creditor repayment, indicating that creditors could receive an additional $8.7 billion.
The exchange aims to repay at least 98% of its customers 118% of the total value in their accounts as of November 2022.
On Sept. 30, FTX distributed its third batch of repayments amounting to $1.6 billion to users, as per Sunil, an FTX creditor and member of the Customer Ad-Hoc Committee, in an X post.
The collapse of FTX initiated a cascade of bankruptcies throughout the crypto sector, leading to one of the longest bear markets in the industry’s history. Bitcoin (BTC) dropped to a low of $16,000 in the wake of the fallout.
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