SBF: FTX never went bankrupt

The co-founder and former CEO of FTX, Sam Bankman-Fried, claims that the exchange would never have actually gone bankrupt. 

He indeed argues that the problem that forced the withdrawals to close was only a liquidity crisis, and not an insolvency issue. He believes that FTX still had sufficient assets to repay all the clients at that time, but due to a liquidity crisis, panic was triggered in the market, making it impossible to quickly cash in the funds.

The interview with SBF: the bankruptcy of FTX never happened

All this is contained in a recent interview that SBF gave from prison to the New York Sun.

The former CEO of the exchange, in fact, has been sentenced to 25 years in prison for fraud, and in reality, the interview was recorded in three different 15-minute sessions held at the Manhattan Detention Center.

The topics covered were varied, such as Bankman-Fried’s thoughts on the political scene, his hopes for a pardon from President Trump, his reflections on the judge who sentenced him, and his thoughts on the prosecutor who secured the conviction.

Furthermore, he also shared more personal reflections on what it means to have a lot of money and lose it suddenly. 

SBF expressed frustration and disappointment with the Biden administration and the Democratic Party, particularly regarding policies related to criptovalute. It should also be noted, however, that he was counting heavily on the political support of the Democrats during the judicial proceedings in which he was a defendant, but in fact, he obtained practically nothing in this regard, despite the billion-dollar donations he had made to them.

Currently, he believes that the Republican Party is more reasonable on these issues, but these statements might also be linked to his recent request for a pardon from Trump.

The failure of FTX

First of all, SBF argues that his trial was unfair and unbalanced. In fact, he believes that his conviction was influenced by political biases and abuses by the prosecutors.

He, on the other hand, has always professed his innocence, to the point of stating that FTX would never have been insolvent because it had enough assets to reimburse all the clients.

In reality, FTX was evidently insolvent, given that at a certain point the exchange was no longer able to fulfill customer withdrawals. 

His thesis is that they should have given them time to sell the assets they owned to cash in liquid funds to process withdrawals, but a crypto exchange should not operate like that. 

In fact, the crypto held by an exchange on behalf of clients must be maintained as such, and not “invested” in other assets, perhaps illiquid or even real estate. A procedure like the one suggested by SBF is absolutely intolerable for a crypto exchange. 

The former CEO of FTX, on the other hand, claims that the company’s failure was due solely to a temporary liquidity crisis and the poor management of the bankruptcy estate by Sullivan & Cromwell.  Obviously, however, he says nothing about the absolutely incorrect and illegitimate practice of not holding all the clients’ crypto assets in the portfolio. 

Sam Bankman-Fried, however, continues to believe that FTX and Alameda Research should have been considered solvent, given that they still had more assets than liabilities, so much so that he imagined that customers could have already been fully reimbursed in November 2022, the month of the withdrawal closure. 

Given that it then took more than two years to reach the reimbursements, this hypothesis of SBF seems completely unfounded. 

The rest of the interview

Subsequently, he spoke about his relationship with money, saying that it was focused on having a positive impact on the world rather than on personal consumption. 

Instead, it was discovered that a not insignificant portion of the clients’ funds was being spent by the company for its personal consumption, and that of the other executives. 

He emphasized that he donated money to causes such as global health, animal welfare, and pandemic prevention, but obviously without specifying that those were not his funds, or the company’s, but their clients’. 

He added that the most difficult aspect of life in prison is the loss of freedom and the ability to access information, and that he feels a lack of control in the prison system.

SBF has appealed to the court for a review of the case, and is said to be cautiously optimistic about it.