Sam “SBF” Bankman-Fried, the founder and former CEO of the bankrupt cryptocurrency exchange FTX, said his “biggest mistake” during the $8 billion collapse was handing control of the company to new management — a decision he claims cost him a last-minute opportunity to save the firm.
Bankman-Fried, once the leader of the $32 billion FTX exchange, is currently serving a 25-year prison sentence for seven felony charges related to the collapse of FTX and Alameda Research in November 2022, which resulted in an $8.9 billion loss of investor funds.
Looking back at the collapse of FTX, Bankman-Fried’s “biggest mistake” was handing over the leadership of the company to its current CEO, John J. Ray III, on Nov. 11, 2022.
“The single biggest mistake I made by far was handing the company over,” SBF told news outlet Mother Jones in an interview published on Friday.
Minutes after signing over the crypto exchange, Bankman-Fried received a call about a potential external investment that may have saved the company from bankruptcy, but it was too late to revoke his signature, he claimed.
Following his appointment as the new CEO, Ray filed for Chapter 11 bankruptcy on Nov. 11, 2022, and hired law firm Sullivan & Cromwell (S&C) for legal assistance in the proceedings.
Bankman-Fried was arrested in the Bahamas on Dec. 12, 2022, after US prosecutors filed criminal charges against him. He was extradited to the US in January 2023.
FTX collapsed due to user fund misappropriation, resulting in billions of dollars worth of trading losses for its sister company, Alameda Research. The quantitative trading firm used FTX customer funds that Bankman-Fried transferred without consent to fund Alameda’s trading losses, now referred to as the Alameda gap.
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Sullivan & Cromwell recommended Ray as new FTX CEO to SBF
Two days ahead of FTX’s bankruptcy filing on Nov. 9, S&C attorney Andrew Dietderich emailed Bankman-Fried with a plan proposing to hire Ray as a chief restructuring officer “in a possible Chapter 11.”
On Feb. 16, 2024, a group of FTX creditors sued the law firm, alleging that it played a role in FTX’s multibillion-dollar fraud and that the company had financially benefited from it. The lawsuit, which sought damages for aiding and abetting fraud and breach of fiduciary duty, was voluntarily dismissed in October 2024.
S&C earned over $171.8 million worth of legal fees from the FTX bankruptcy by June 27, 2024, according to legal filings reviewed by Reuters.
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FTX users still await over $4.2 billion in repayments
Nearly three years after the exchange’s collapse, FTX creditors continue to await full repayment.
The FTX estate started repaying creditors in February with a $1.2 billion payout, followed by a $5 billion distribution in May. With September’s payment, the exchange has reimbursed a total of $ $7.8 billion to its creditors.
FTX is estimated to have up to $16.5 billion worth of recovered assets available to repay creditors, meaning that creditors are set to receive another $8.7 billion.
The exchange plans to repay at least 98% of its customers 118% of the value in their accounts as of November 2022.
On Sept. 30, FTX distributed its third set of repayments worth $1.6 billion to its users, according to Sunil, FTX creditor and Customer Ad-Hoc Committee member, in an X post.
The FTX collapse triggered a wave of bankruptcies across the crypto industry, ushering in one of the longest bear markets in the sector’s history. Bitcoin (BTC) fell to as low as $16,000 following the fallout.
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