Sam “SBF” Bankman-Fried, the founder and former CEO of the disgraced cryptocurrency exchange FTX, labeled his decision to transfer the company to new management as his “biggest mistake,” which he believes thwarted his efforts to rescue the company from its $8 billion collapse.
In hindsight, Bankman-Fried, who was once at the helm of a $32 billion enterprise, now faces a 25-year prison sentence stemming from seven felony charges associated with FTX’s and Alameda Research’s downfall in November 2022, leading to an $8.9 billion loss for investors.
Reflecting on the exchange’s collapse, he believes that the pivotal error occurred when he handed leadership to John J. Ray III on November 11, 2022. “The single biggest mistake I made by far was handing the company over,” he remarked to Mother Jones in a recent interview.
Just minutes after transferring the exchange’s control, Bankman-Fried claims he was contacted regarding a potential investor who could have saved FTX, but it was too late to retract his agreement.
Following his transition to the new CEO, Ray initiated Chapter 11 bankruptcy proceedings on the same day, engaging law firm Sullivan & Cromwell for guidance.
Bankman-Fried was apprehended in the Bahamas on December 12, 2022, after U.S. authorities charged him, and he was later extradited to the U.S. in January 2023.
The collapse of FTX was attributed to the misuse of customer funds, resulting in significant trading losses for its affiliate, Alameda Research. The firm irresponsibly utilized customer investments without approval to cover its own trading deficits, a situation now identified as the “Alameda gap.”
Sullivan & Cromwell Endorsed New Leadership
As FTX’s bankruptcy filing loomed on November 9, Sullivan & Cromwell attorney Andrew Dietderich had earlier suggested hiring Ray as chief restructuring officer ahead of the Chapter 11 declaration.
On February 16, 2024, creditors of FTX accused Sullivan & Cromwell of involvement in the multibillion-dollar fraud, filing a lawsuit that was eventually dismissed in October 2024.
Sullivan & Cromwell accrued over $171.8 million in legal fees related to FTX’s bankruptcy by June 2024, per reports.
Outstanding Repayments for FTX Users
As of now, nearly three years post-collapse, creditors of FTX are still awaiting full reimbursements. The FTX estate began disbursing funds earlier this year, commencing with a $1.2 billion payout, followed by $5 billion in payments later on.
With the latest distributions, FTX has reimbursed a total of approximately $7.8 billion to creditors, with around $16.5 billion in recovered assets still available, suggesting further repayments are on the way.
FTX aims to ensure that at least 98% of its customers receive back 118% of their account values from November 2022.
The implosion of FTX triggered numerous bankruptcies within the cryptocurrency realm, marking the onset of a prolonged bear market that severely impacted the sector, with Bitcoin prices plummeting to as low as $16,000.
