Sam Bankman-Fried has apologised for the crisis that has engulfed his financial empire and admitted crypto exchange FTX did not have enough readily accessible funds to meet a $5bn wave of customer withdrawals.
In a series of tweets published on Thursday, Bankman-Fried said: “I’m sorry. That’s the biggest thing. I fucked up, and should have done better.”
Bankman-Fried’s mea culpa comes as FTX, one of the world’s biggest crypto trading venues, teeters on the brink of collapse. The 30-year-old executive on Thursday said the exchange had only $400mn in easily tradeable US dollar assets to cover a record $5bn surge of redemption requests on Sunday.
He had believed in the run-up to the crisis that the exchange had 24-times average daily withdrawals of US dollar liquidity available.
The admission by Bankman-Fried, whose personal fortune was estimated just months ago at $24bn, casts fresh doubt on whether customers will be made whole. He said the value of the group’s assets exceeded client deposits, but that “liquidity varies widely, from very to very little.”
“Every penny of that — and of the existing collateral — will go straight to users, unless or until we’ve done right by them,” he vowed.
Bankman-Fried’s woes began late last week when crypto industry publication CoinDesk reported that a large portion of the assets backing the executive’s trading house Alameda Research were in FTT, a coin issued by FTX.
Binance chief Changpeng Zhao, Bankman-Fried’s arch-rival, on Sunday said his exchange would liquidate its FTT holdings, igniting both a sell-off in the token and a run on FTX.
Bankman-Fried on Thursday said he plans to wind down trading at Alameda and also said he was prepared to stand down as the leader of FTX.
Binance on Tuesday launched a deal to rescue FTX, but backed out a day later, citing concerns about FTX’s business practices and reported investigations by US regulators.
The US Securities and Exchange Commission has expanded an investigation into FTX, which includes examining the platform’s cryptocurrency lending products and the management of customer funds, said a person familiar with the matter.
Wall Street’s regulator launched the probe months ago but sought additional information after Binance’s acquisition plans were announced on Tuesday, the person added. The SEC is also examining FTX’s relationship with a US entity, FTX US.
Bankman-Fried on Thursday said users of FTX.US, which is a separate entity from his main international exchange, “are fine”. Hours later the FTX.US website announced trading on the platform may be halted in a few days and urged users to close down any positions they wished to close. “Withdrawals are and will remain open,” it added.
The crisis at FTX has also dealt a blow to prominent investors.
Venture capital firm Sequoia Capital said it would mark down its $214mn investment in FTX to zero after a run on the exchange in recent days blew a massive hole in its balance sheet and cast serious doubts over its survival. “In recent days, a liquidity crunch has created solvency risk for FTX,” Sequoia said in a note on Wednesday to investors in its fund.
Other backers including SoftBank, Tiger Global, BlackRock and hedge fund managers Paul Tudor Jones and Izzy Englander also face losses.
‘It’s way too crazy’: Customers weigh in
The crisis at crypto exchange FTX has left thousands of customers bracing for losses, with some directing anger at the company’s founder Sam Bankman-Fried.
Users have been unable to withdraw their funds for several days, with the company’s website now “strongly advis[ing]” users not to deposit money.
“It’s way too crazy,” said 21-year-old Matthias who said he has $1,700 stuck on the exchange. “FTX had a big following and a big reputation. The whole situation is going to make crypto as a whole look more unstable, making [decentralised finance] more or less unusable.”
“I feel like shit,” added 21-year old Shadan Shoeb from India who began trading on FTX in April and said he has $2,300 stuck on the exchange. “It’s all that I made in the last six months . . . I trusted [FTX and Bankman-Fried] but it looks like everything is lost.”
Nikou Asgari
