FTX’s disgraced founder, SBF, still believes he can rebuild his bankrupt crypto empire and bring customers back to health
Disgraced FTX founder Sam Bankman-Fried believes there is enough value locked up on the exchange’s balance sheet to repay customer deposits in custody and rebuild his dying crypto empire.
In a tweet thread suggesting the 30-year-old considers himself the hero who narrowly emerged, the self-proclaimed altruist said he still hopes there’s a future for a post-bankruptcy FTX.
“What can I try? Increase liquidity, heal customers and restart,” he wrote to his 1 million followers on Twitter on Tuesday. “I can only try. I’ve failed enough for the month, and part of me thinks I can accomplish something.”
For the first time since FTX and its roughly 130 affiliated subsidiaries filed for bankruptcy last Friday, Bankman-Fried released concrete figures on the quality of its balance sheet.
He claimed the group still owns $9 billion worth of assets at current prices after they were “tagged” – half of what they were worth a month ago. That compares to $8 billion in cash obligations that it has to meet.
Good news?
In theory, this could be seen as good news for clients, as it suggests that the hot air on the balance sheet has already been largely emptied, leaving a more solid foundation to work from. Even though their value has fallen in recent weeks, there still appears to be a net reservoir of $1 billion worth of assets to liquidate.
The problem is that according to Bankman-Fried, $3.5 billion of the company’s total assets were illiquid, meaning they couldn’t be easily converted into cash to meet claims. This can be anything from real estate to exotic, bespoke derivative contracts that are rarely traded and difficult to value.
However, it’s not clear how much of what Bankman-Fried posts on social media ultimately matters. He no longer serves as CEO and his company is now in the hands of John J. Ray III, who oversaw the orderly dissolution of Enron on behalf of its shareholders.
Second, Bankman-Fried denied last week that Alameda Research – his crypto hedge fund known for exploiting the so-called “Kimchi Premium” arbitrage opportunity in the price of Bitcoin – on “Any strange things‘ he saw on Twitter.
In truth, Alameda was the cause of FTX’s bankruptcy as it borrowed its client funds to fund speculative crypto bets that turned sour. That Wall Street Journal reported that Bankman-Fried and Alameda CEO Caroline Ellison, who once had a romantic relationship, had covered it up internally.
“Pretty disgusted”
His empire collapsed spectacularly last week after Binance withdrew its support following news earlier this month that Alameda, one of FTX’s key market makers and business partners, is covering up its bankruptcy.
Binance founder Changpeng Zhao said he will sell his entire holding of FTX’s native token FTT, which he received after exiting an investment in the rival exchange. This sparked a wave of customer withdrawals that Bankman-Fried aptly quantified about $5 billion last Sunday alone.
The failure of FTX has been compared to both the bankruptcy of Wall Street investment bank Lehman Brothers in 2008 and the pyramid scheme scam perpetrated by Bernie Madoff.
Bankman-Fried has even deceived a number of savvy financial investors, including Singapore sovereign wealth fund Temasek and Sequoia Capital, which in late September attested his “savior complex” in a flattering profile since dismantled. Meanwhile, Bankman-Fried’s own multi-billion-dollar fortune has gone up in smoke and now consists largely of his 7%-plus stake in trading app Robinhood.
Although Bankman-Fried’s offshore crypto exchange was deliberately incorporated in Antigua and Barbuda, it now seeks protection from creditors under Chapter 11 of the US bankruptcy law.
This process allows a company to reorganize its capital structure to clean up its balance sheet. This usually involves wiping out shareholders in the process while ultimately agreeing with lenders to swap their debt claims for equity.
This could yet result in a leaner, healthier FTX emerging from bankruptcy one day, although it is highly unlikely that it will ever regain market confidence.
On Monday, Travis Kling, chief investment officer at crypto hedge fund Ikigai Asset Management, penned a heartbreaking, sometimes explosive, condemnation of Bankman-Fried after his investors’ funds were trapped in the stock market.
“I’m pretty disgusted with space as a whole and sort of disgusted with humanity in general,” he wrote.
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