Sam Bankman-Fried apologizes for the FTX crisis

Sam Bankman-Fried apologizes for the FTX crisis
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Sam Bankman-Fried has apologized for the crisis that hit his financial empire and admitted that cryptocurrency exchange FTX did not have enough readily accessible funds to deal with a $5 billion wave of customer withdrawals.

In a series of tweets posted Thursday, Bankman-Fried said: “Sorry. That’s the biggest. I screwed up, and I should have done better.”

Bankman Fried’s mea culpa It comes as FTX, one of the world’s largest cryptocurrency trading venues, teeters on the brink of collapse. The 30-year-old executive said Thursday that the exchange had just $4 billion* in easily tradable US dollar assets to cover a record $5 billion surge in bailout requests on Sunday.

He had believed in the run-up to the crisis that the exchange had average daily withdrawals of 24 times of available US dollar liquidity.

The admission by Bankman-Fried, whose personal fortune was estimated just a few months ago at $24 billion, casts new doubt on whether clients will recover. He said the value of the group’s assets exceeded customer deposits, but “liquidity varies a lot, from very little to very little.”

“Every penny of that, and of the existing warranty, will go directly to the users, unless or until we’ve done the right thing for them,” he promised.

Bankman-Fried’s troubles began late last week when crypto industry publication CoinDesk reported that a large portion of the assets backing the executive side of trading house Alameda Research were in FTT, a coin issued by FTX.

Binance boss Changpeng Zhao, Bankman-Fried’s arch-rival, said on Sunday that his exchange would liquidate its FTT holdings, sparking a token selloff and a run on FTX.

Bankman-Fried said Thursday that he plans to close the trade in Alameda and also said he was prepared to step down as leader of FTX.

Binance launched a deal to bail out FTX on Tuesday, but withdrew a day later, citing concerns about FTX’s trading practices and investigations reported by US regulators.

The US Securities and Exchange Commission has expanded an investigation into FTX, including examining the platform’s crypto lending products and the management of customer funds, a person familiar with the matter said.

The Wall Street regulator launched the investigation months ago but sought additional information after plans to take over Binance were announced on Tuesday, the person added. The SEC is also examining FTX’s relationship with a US entity, FTX US.

Bankman-Fried said Thursday that users of FTX.US, which is a separate entity from its main international exchange, “are doing fine.” Hours later, the FTX.US website announced that trading on the platform could stop in a few days and urged users to close any positions they wanted to close. “Withdrawals are and will remain open,” she added.

The FTX crisis has also dealt a serious blow to prominent investors.

Venture capital firm Sequoia Capital said it would zero out its $214 million investment in FTX after a run on the exchange in recent days tore a massive hole in its balance sheet and cast serious doubt on its survival. “In recent days, a liquidity crisis has created a solvency risk for FTXSequoia said in a note Wednesday to investors in his fund.

Other backers, including SoftBank, Tiger Global, BlackRock and hedge fund managers Paul Tudor Jones and Izzy Englander, are also facing losses.

‘It’s too crazy’: customers say

The crisis at crypto exchange FTX has left thousands of customers bracing for losses, with some angry at company founder Sam Bankman-Fried.

Users have been unable to withdraw their funds for several days, and the company’s website now “strongly recommends[ing]” users not to deposit money.

“It’s too crazy,” said Matthias, 21, who said he has $1,700 stuck in the exchange. “FTX had a huge following and a great reputation. The whole situation will make cryptocurrencies as a whole look more unstable, making [decentralised finance] more or less useless.”

“I feel like shit,” added Shadan Shoeb, 21, from India, who started trading on FTX in April and said he has $2,300 stuck on the exchange. “It’s all I’ve earned in the last six months. . . I trusted [FTX and Bankman-Fried] but it seems that all is lost.”

Nikou Asgari

*This story has been modified to correct the amount of liquid funds available.

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