Sam “SBF” Bankman-Fried, the founder and former CEO of the now-defunct cryptocurrency exchange FTX, reflected on what he called his “biggest mistake” — transferring control of the company to a new management team. This choice ultimately hindered his ability to rescue the exchange from its claimed $8 billion collapse.
Bankman-Fried, once at the helm of the $32 billion FTX, is currently serving a 25-year sentence for multiple felony charges linked to the disastrous fall of FTX and Alameda Research in November 2022, yielding a staggering $8.9 billion loss in funds for investors.
In examining the series of events leading to the decline of FTX, he stated that this critical error occurred on November 11, 2022, when he handed leadership over to the present CEO, John J. Ray III.
“The single biggest mistake I made by far was handing the company over,” Bankman-Fried remarked to Mother Jones in an interview released on Friday.
He reported that he received a call regarding a potential external investment shortly after signing away the crypto exchange, an investment that could have averted bankruptcy, but it was too late to retract his signature.
Following the change in leadership, Ray declared Chapter 11 bankruptcy for FTX and sought legal help from the law firm Sullivan & Cromwell.
Bankman-Fried was apprehended in the Bahamas on December 12, 2022, after U.S. prosecutors filed criminal charges against him, with his extradition to the U.S. occurring in January 2023.
The fall of FTX stemmed from the misallocation of user funds, resulting in immense trading losses for its affiliate Alameda Research, which was reportedly funded using customer deposits without approval — a situation now referred to as the “Alameda gap”.
Sullivan & Cromwell Advocated for Ray’s Appointment as CEO
On November 9, 2022, two days before the official bankruptcy filing, attorney Andrew Dietderich from S&C sent an email to Bankman-Fried featuring a plan to appoint Ray as chief restructuring officer during a possible Chapter 11.
Source: Documentcloud.org
On February 16, 2024, a collective of FTX creditors initiated legal action against the law firm, alleging participation in the multi-billion-dollar fraud involving FTX. The lawsuit, claiming damages for complicity and breaches of fiduciary duty, was dismissed voluntarily in October 2024.
S&C earned over $171.8 million in legal fees from the FTX bankruptcy proceedings by June 27, 2024, as per legal documents evaluated by Reuters.
FTX Users Await Remaining $4.2 Billion in Reimbursements
As nearly three years pass since the exchange’s failure, FTX creditors are still anticipating full reimbursement. The FTX estate began disbursing payouts to creditors starting in February with a $1.2 billion payout, followed by a $5 billion distribution in May, totaling $7.8 billion reimbursed to creditors so far.
FTX reportedly possesses up to $16.5 billion in recoverable assets designated for creditor repayments, projecting an additional $8.7 billion for future distributions to creditors. The exchange’s plan includes reimbursing at least 98% of its clients with 118% of their account’s value from November 2022.
Source: Sunil
On September 30, FTX executed its third round of repayments amounting to $1.6 billion to its users, as reported by Sunil, a creditor and member of the Customer Ad-Hoc Committee, through a post on X.
The incident surrounding FTX triggered a cascade of bankruptcies through the cryptocurrency sector, leading to one of the most extended bear markets in the industry’s history, with Bitcoin even plunging to a low of $16,000 following the upheaval.
Related: The $2,500 doco about the FTX collapse on Amazon Prime and its creation thanks to cooperation with family.
