Sam “SBF” Bankman-Fried, the founder and former CEO of the now-bankrupt cryptocurrency exchange FTX, stated that his “greatest mistake” during the $8 billion collapse was relinquishing control of the company to new leadership — a choice he believes cost him a last-ditch chance to salvage the firm.
Bankman-Fried, who once spearheaded the $32 billion FTX exchange, is currently serving a 25-year prison term for seven felony charges tied to the collapse of FTX and Alameda Research in November 2022, which led to an $8.9 billion loss of investor funds.
Reflecting on the fall of FTX, Bankman-Fried identified his “greatest mistake” as transferring control to current CEO John J. Ray III on Nov. 11, 2022.
“The single biggest mistake I made by far was handing the company over,” SBF shared in an interview with Mother Jones published on Friday.
Shortly after signing over the exchange, Bankman-Fried received a call regarding a possible external investment that might have rescued the company from bankruptcy, yet he asserted it was too late to retract his signature.
Following Ray’s appointment as CEO, he proceeded to file for Chapter 11 bankruptcy on Nov. 11, 2022, and enlisted the law firm Sullivan & Cromwell (S&C) for legal support during the proceedings.
Bankman-Fried was apprehended in the Bahamas on Dec. 12, 2022, after U.S. prosecutors lodged criminal charges against him. He was extradited to the U.S. in January 2023.
The downfall of FTX was attributed to the improper use of user funds, resulting in significant trading losses for its sister company, Alameda Research. The quantitative trading firm utilized FTX customer funds that Bankman-Fried transferred without authorization to cover Alameda’s trading deficits, now known as the Alameda gap.
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Sullivan & Cromwell advised Ray as the new FTX CEO to SBF
Two days prior to FTX’s bankruptcy filing on Nov. 9, S&C attorney Andrew Dietderich emailed Bankman-Fried with a proposal suggesting Ray be appointed as a chief restructuring officer “in a potential Chapter 11.”
On Feb. 16, 2024, a faction of FTX creditors initiated a lawsuit against the law firm, asserting that it played a part in FTX’s multibillion-dollar fraud and that the firm had profited from it. The lawsuit, which sought compensation for complicity in fraud and breach of fiduciary duty, was voluntarily withdrawn in October 2024.
S&C accrued over $171.8 million in legal fees from the FTX bankruptcy by June 27, 2024, as reported in legal documents examined by Reuters.
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FTX customers are still awaiting over $4.2 billion in repayments
Nearly three years post-collapse, FTX creditors are still waiting for complete reimbursement.
The FTX estate began reimbursing creditors in February with a $1.2 billion payout, followed by a $5 billion distribution in May. As of September’s payment, the exchange has repaid a total of $7.8 billion to its creditors.
FTX is estimated to have around $16.5 billion in recovered assets ready to repay creditors, indicating that creditors could receive an additional $8.7 billion.
The exchange aims to reimburse at least 98% of its customers 118% of the value in their accounts as of November 2022.
On Sept. 30, FTX allocated its third repayment installment amounting to $1.6 billion to its users, as stated by Sunil, an FTX creditor and member of the Customer Ad-Hoc Committee, in an X post.
The collapse of FTX sparked a series of bankruptcies throughout the crypto sector, initiating one of the longest bear markets in the industry’s history. Bitcoin (BTC) plummeted to as low as $16,000 following the crisis.
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