'My hands were tied': Sam Bankman-Fried breaks his silence days after the dramatic collapse of his crypto exchange
"When it rains, it pours," Bankman-Fried said, adding that a combination of high customer withdrawals and leverage contributed to FTX's downfall.
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- Sam Bankman-Fried broke his silence days after his crypto exchange FTX International imploded in spectacular fashion.
- "The full story here is one I'm still fleshing out every detail of, but [at] a very high level, I f*cked up twice," he tweeted.
- Bankman-Fried attributed FTX's collapse to higher-than-expected leverage and a waterfall of withdrawals.
Sam Bankman-Fried broke his silence via a Tweet-storm on Thursday, days after his FTX International crypto exchange imploded and lost billions of dollars.
"When it rains, it pours," he tweeted, explaining that a combination of high customer withdrawals and higher-than-expected leverage on the company's books contributed to its swift downfall.
"The full story here is one I'm still fleshing out every detail of, but [at] a very high level, I f*cked up twice," Bankman-Fried added.
Specifically, he said his sense before the collapse was that FTX had zero leverage and enough liquidity to deliver 24x the average daily withdrawals. In reality, FTX had an actual leverage of 1.7x and liquidity to cover just 0.8x Sunday's withdrawals.
"A poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower," Bankman-Fried said in explaining how his estimates of FTX's leverage were off by so much.
However, a report from Reuters suggests something more nefarious was going on, with FTX transferring customer funds to Bankman-Fried's trading firm, Alameda Research, earlier this year.
As cracks started to form in the viability of FTX, which was first tipped off by a CoinDesk report, customers rushed for the exits and withdrew $5 billion from the exchange on Sunday, "the largest by a huge margin," Bankman Fried said.
He apologized throughout the thread and said his number one goal is to do right by customers to make them whole. But there's no sense if that's actually going to happen, or if bankruptcy claims court lies ahead. Bankman-Fried said FTX is spending the week "doing everything we can to raise liquidity."
"I can't make any promises about that. But I'm going to try," he vowed, adding that he is in talks with a number of players about letters of interest and term sheets. "We'll see how that ends up."
So far, it hasn't gone well. FTX competitor Binance signed a non-binding letter of intent to fully acquire the company on Tuesday, but backed out a day later after it examined its books and was unimpressed.
On Thursday, Bankman-Fried appeared to tip his hat to his competitor, Changpeng Zhao of Binance.
"At some point I might have more to say about a particular sparring partner, so to speak. But you know, glass houses. So for now, all I'll say is: well played; you won," he tweeted.
The situation is still fast-developing as investigations from the Securities and Exchange Commission, Commodity Futures Trading Commission, and Justice Department play out. And Bankman-Fried caveated his 21-tweet thread with "I MAY WELL HAVE NOT DESCRIBED THINGS RIGHT" and "I'M NOT A GOOD DEV AND PROBABLY MISDESCRIBED SOMETHING."
You can read the full tweet thread here.