Regulators, investors, and the media continue to probe the text to which FTX founder Sam Bankman-Fried understood the collapse he created.
- Crypto experienced one of its largest historic failures on November 8 when one of its largest exchanges FTX entered a liquidity crisis.
- FTX crashed the entire crypto market, announcing bankruptcy on November 11, and was revealed to be one of the most poorly managed companies in modern finance.
- Disgraced founder Sam Bankman-Fried (SBF) is expected to testify before Congress about the company’s questionable shifting of money between itself and its partner company Alameda Research.
- With red flags and confusion surrounding the company for years, it remains uncertain how much he purposely misled investors or simply didn’t understand what he was doing.
Why it’s Important
The confusion surrounding FTX’s assets continues to unfurl as new and old controversies reveal the full extent of the company’s poor management. SBF has yet to receive charges from any of the federal organizations investigating the collapse of FTX but his $16 billion fortune has been forfeited.
The full extent of his assets remains to be seen. FTX is currently being disassembled by restructuring lawyers who are struggling to determine the full extent of the company’s assets, including a possible share in Elon Musk’s privatized Twitter. SBF offered to join Elon Musk’s effort to purchase Twitter and backed out of the deal, but still listed a Twitter stake as an investment while trying to find a buyer for FTX.
“The balance sheet, upon which Semafor also relied for its reporting, listed $43.3 million of Twitter stock as an illiquid deliverable—or sellable—asset. That suggests that Bankman-Fried, as of November 10, either believed that Alameda owned a stake in Musk’s Twitter, or that he was uncertain and therefore misleading potential investors,” says Axios.
SBF either was not truthful about his assets or didn’t know what he possessed, and this level of confusion appears to have been ongoing for four years or more.
Backing up a Bit
Alexander Pack is a managing partner at Hack.VC and he visited the offices of Alameda Research in November 2018. He reports that red flags began appearing, including consistently declining profits at Alameda, trading errors, and unethical behavior. He describes the possibility of trying to invest in FTX as a “shell game,” that terms and conditions of his deal changed frequently and he didn’t know where his investment money was going.
“Pack said he was ‘pretty freaked’ by the risky and unethical behavior that he did not want to be part of. He also recalls Bankman-Fried taking big risks with trading, losing $5 million to $10 million at a time in a very emotionless way, almost as if he was playing a video game,” says Fortune.
“I am shocked, appalled, and frankly, angry. Bitcoin was birthed from the trauma of 2008. Sam’s actions are a perversion of everything crypto stands for. My heart goes out to all of the victims whose trust was betrayed, savings lost, and livelihoods destroyed,” says Alameda founder Tara Mac Aulay.