10 Sam Bankman-Fried News Articles
~ Wednesday, November 30, 2022 Blog Post ~
(1) FTX’s Sam Bankman-Fried lost billions and the company filed for bankruptcy — it could signal the ‘demise’ of crypto, expert says
Sources:
a. https://twitter.com/CNBC/status/1591196836567867397
By Cheyenne DeVon, Friday, November 11, 2022
FTX, one of the world’s largest cryptocurrency exchange platforms, is in major financial turmoil.
At its peak, FTX was valued at $32 billion. The company filed for bankruptcy on Nov. 11 after competing offshore crypto exchange, Binance, backed out of a deal to acquire it and users withdrew around $6 billion in funds.
FTX’s Sam Bankman-Fried, who often goes by SBF, stepped down as CEO on Friday. He saw his estimated net worth drop by billions virtually overnight as his cryptocurrency exchange platform teeters on the brink of collapse.
Between Nov. 8–9, Bankman-Fried’s net worth plummeted to $991.5 million. That’s around a 94% drop from his estimated $15.2 billion previously, according to a Bloomberg analysis.
“The fall of FTX could be the moment that really kicks off the broader decline — maybe even demise — of cryptocurrency,” James Royal, principal reporter at Bankrate, tells CNBC Make It.
What happened?
Binance CEO Changpeng Zhao, commonly known as CZ, initially invested in FTX in 2019, but later sold his controlling stake in 2021, Reuters reports.
Zhao was paid about $2.1 billion worth of FTT, the native crypto token that gives users access to the FTX trading platform.
Here’s why that matters: A leaked balance sheet revealed that the value of Bankman-Fried’s crypto trading firm, Alameda Research, was heavily reliant on the value of FTT, according to Coindesk.
So when Zhao announced on Nov. 6 that his company would liquidate any remaining FTT it held due to “recent revelations,” it triggered fears among investors that FTX would be unable to pay its debts.
Many began to withdraw their funds, which led to a stark 72% drop in FTT’s price. As FTT’s price fell, so did the value of FTX’s assets that were tied to it.
What happens to crypto traders on the FTX platform if it collapses?
“The first thing traders need to do now is understand the legal duty that an exchange has to them, and whether their assets are held securely,” Royal says.
Like many other crypto exchanges, FTX’s insurance coverage only addresses certain criminal events such as theft or fraud, Martin Leinweber, digital asset product strategist at MarketVector Indexes, tells CNBC Make it.
“There is no insurance coverage just because the exchange fails,” he says. “If there’s no bailout, depositors in FTX could lose everything.”
How will FTX’s downfall affect crypto prices?
In short, it doesn’t look good. “The events shook the broader cryptocurrency markets, sending bitcoin and other currencies to two-year lows,” Leinweber says.
Bitcoin’s price hovered around $17,000 as of Nov. 11, down from above $20,000 on Nov. 8 and well below the peak price of around $68,000 it reached in November 2021.
“With the exception of so-called stablecoins, crypto prices are supported entirely by belief in their future, not by any fundamental underpinning such as assets or cash flow,” Royal says.
That means crypto’s value solely depends on what someone is willing to pay for it, which is why its price can be subject to erratic fluctuations and dips.
“Crypto has been seen as a lottery ticket, and hypesters have been pumping crypto for years,” Royal says. “Unfortunately, it usually takes massive losses for the scales to fall from traders’ eyes.”
(2) FTX held less than $1bn in liquid assets against $9bn in liabilities
Sources:
a. https://twitter.com/ftfinancenews/status/1591543096982085633?t=mFcKDSb6PScOa1SfnSegmQ&s=09
b. https://www.ft.com/content/f05fe9f8-ca0a-48d5-8ef2-7a4d813af558
Vast gap highlights the dire state of Sam Bankman-Fried’s exchange before it collapsed into bankruptcy
Antoine Gara in New York and Kadhim Shubber and Joshua Oliver in London NOVEMBER 12 2022
Sam Bankman-Fried’s main international FTX exchange held just $900mn in easily sellable assets against $9bn of liabilities the day before it collapsed into bankruptcy, according to investment materials seen by the Financial Times.
The largest portion of those liquid assets listed on a FTX international balance sheet dated Thursday was $470mn of Robinhood shares owned by a Bankman-Fried vehicle not listed in Friday’s bankruptcy filing, which included 134 corporate entities.
The document, shared with prospective investors before the bankruptcy, provides a detailed picture of the financial hole in the FTX crypto empire and suggests customers of FTX international may face steep losses on cash and crypto assets they held on the exchange.
FTX’s collapse has delivered a powerful blow to a crypto industry already reeling from a string of corporate failures this year.
Bankman-Fried had been a leading figure in the sector and had presented himself as an entrepreneur keen to bring the wild west crypto market in line with mainstream regulation. The 30-year-old had secured backing from blue-chip investors, became a major donor to the US Democratic party and plastered his FTX exchange’s logo on the Miami Heat arena during his meteoric rise following the founding of his trading venue in 2019.
Bankman-Fried on Friday put his $32bn international exchange, along with FTX US and his trading firm Alameda Research, into bankruptcy proceedings in federal court in Delaware.
John J Ray, the veteran insolvency practitioner brought in to run the bankruptcy as FTX chief executive, said on Friday that the cryptocurrency group “has valuable assets” and that the bankruptcy proceedings would allow the company to “assess the situation and . . . maximise recoveries for stakeholders”.
The process has already run into issues after barely 24 hours, incorrectly listing entities FTX did not own in its initial filing and suffering an apparent hack on Friday night.
FTX declined to comment.
Friday’s bankruptcy filing provided few details on the group’s financial health but said both assets and liabilities range between $10bn-$50bn, and that the number of creditors exceeds 100,000.
A spreadsheet listing FTX international’s assets and liabilities, seen by the Financial Times, point at the issues that brought Bankman-Fried crashing back down to earth. It references $5bn of withdrawals last Sunday, and a negative $8bn entry described as “hidden, poorly internally labled ‘fiat@’ account”.
Bankman-Fried told the Financial Times the $8bn related to funds “accidentally” extended to his trading firm, Alameda, but declined to comment further. Earlier this week, he tweeted that FTX international had $4bn in easily tradeable assets when it faced Sunday’s $5bn surge of withdrawals.
“There were many things I wish I could do differently than I did, but the largest are represented by these two things: the poorly labeled internal bank-related acount [sic], and the size of customer withdrawals during a run on the bank,” the spreadsheet adds.
In the investment materials, FTX Trading Ltd, the company behind the main international exchange, is recorded as having liabilities of $8.9bn, the biggest portion of which is $5.1bn of US dollar balances.
Healthy companies typically have assets that match or exceed their liabilities. The spreadsheet says FTX Trading had a total of $9.6bn of assets, but it is unclear how much of that value could be realised.
The vast majority of FTX Trading’s recorded assets are either illiquid venture capital investments or crypto tokens that are not widely traded, according to the spreadsheet, which cautions that the figures “are rough values, and could be slightly off; there is also obviously a chance of typos etc. They also change a bit over time as trades happen.”
The company’s biggest asset as of Thursday was $2.2bn worth of a cryptocurrency called Serum. Serum’s total market value was $88mn on Saturday, according to data provider CryptoCompare, suggesting FTX’s holdings would be worth far less if sold into the market. CryptoCompare’s figures take into account the coin’s liquidity.
On Friday, the Financial Times reported that Alameda and FTX between them had some $5.4bn of illiquid venture capital investments, according to other documents provided to investors earlier in the week.
Bankman-Fried had been racing to raise emergency funding but was unable to persuade investors to rescue his collapsed business empire.
The new investment materials show that he was seeking to raise $6bn-$10bn including from a convertible preferred stock paying a 10 per cent dividend that could later be converted into common equity in FTX international at a valuation of between $12bn-$15bn. “This is just a lower bound on the terms investors can get,” the materials add.
Until Friday afternoon, Bankman-Fried was looking to sell the $472mn of Robinhood shares, the largest liquid asset listed for FTX Trading, in privately negotiated deals he was arranging on the messaging app Signal, according to a person directly involved in the negotiations.
The person noted that the Robinhood shares were held by an Antigua and Barbuda entity called Emergent Fidelity, which is personally controlled by Bankman-Fried, according to US securities filings. Emergent Fidelity is not among the entities listed in Friday’s bankruptcy filing.
Bankman-Fried was entertaining offers at an about 20 per cent discount to Robinhood’s volume-weighted average price, or about $9 per share, said the investor, who ultimately declined to buy due to perceived legal risks.
Bankman-Fried acquired a 7.6 per cent stake in Robinhood in May and had intimated at considering a full acquisition of the popular trading app.
The second-biggest liquid asset was $200mn of cash held with Ledger Prime, a crypto investment firm owned by Alameda. The documents record no other US dollar balances held by FTX Trading.
In all, the spreadsheet says FTX Trading’s assets were $900mn of “liquid” assets, $5.5bn of “less liquid” assets consisting of crypto tokens, and $3.2bn of illiquid private equity investments. There is also an obscure $7mn holding called “TRUMPLOSE”. There are no bitcoin assets listed, despite bitcoin liabilities of $1.4bn.
Other documents provided to investors say that FTX US, Bankman-Fried’s onshore exchange, held $115mn of cash. Of that sum, $48mn was listed as corresponding to customer US dollar balances of $60mn.
(3) FTX files for bankruptcy. Here’s everything you should know
By MarketWatch, November 11, 2022
FTX, once the world’s third-largest crypto exchange, filed for voluntary Chapter 11 bankruptcy in a Delaware court on Friday.
Once one of the most prominent players in the industry, FTX’s collapse happened in less than a week. Regulators and law enforcement agencies including the U.S. Securities and Exchange Commission and Justice Department are investigating the exchange.
Its co-founder and former chief executive Sam Bankman-Fried, whose net worth at its highest point was more than $26 billion, saw his fortune almost vanish overnight.
FTX’s fall could also put more pressure on the already battered crypto market and shake up the rather nascent industry, analysts said.
This article includes MarketWatch’s coverage so far around the still-evolving situation and its contagion, and will continue to be updated.
(4) ‘A lot of people have compared this to Lehman. I would compare it to Enron’: Larry Summers comments on FTX bankruptcy
By Vivien Lou Chen, November 11, 2022
Former U.S. Treasury Secretary Larry Summers is likening the collapse of troubled cryptocurrency exchange FTX to the meltdown that engulfed Houston-based energy company Enron two decades ago.
In an interview with Bloomberg Television’s “Wall Street Week,” Summers said regulators ought to draw a few lessons from the FTX episode. One is the need for “more forensic accountants” to help detect issues at both the corporate and national level, he said.
The swift collapse of FTX was underscored on Friday by the company’s announcement that it had begun Chapter 11 bankruptcy proceedings in a Delaware court and that its chief executive, Sam Bankman-Fried, had resigned. John J. Ray III, the lawyer who was brought in to clean up the mess left at Enron, was appointed to succeed Bankman-Fried. The announcement rattled the cryptocurrencies sector, where the price of Bitcoin BTCUSD, +2.61% touched a two-year low after FTX’s announcement.
“A lot of people have compared this to Lehman. I would compare it to Enron,” Summers reportedly said.
Enron is the once high-flying energy trading company that collapsed in late 2001 amid accusations of accounting fraud, and changed the way investors looked at stock recommendations and at corporate executives. At the time, it was the biggest corporate failure in American history and its collapse is considered to be one of the biggest market events of the past quarter-century.
As of Friday, all three major U.S. stock indexes SPX, -0.16% DJIA, +0.01% were mixed. The bond market was closed for the Veterans Day holiday.
(5) Who is Sam Bankman-Fried, the FTX CEO who lost billions in crypto?
Sources:
The California native known as SBF never cared for school, has given millions to President Joe Biden and likes his Oreo cookies.
(6) The $26 billion rise and fall of crypto king Sam Bankman-Fried
Sources:
The boy wonder of cryptocurrencies watched as his empire vaporized nearly overnight, leaving depositors scrambling and investigators taking a look.
(7) ‘Bedazzled by money’: Democratic ties to Sam Bankman-Fried under scrutiny after FTX collapse
Sources:
Some of FTX founder Sam Bankman-Fried’s infamy may rub off on politicians who took his money and on former regulators and Capitol Hill staffers who took…
(8) ‘I was shocked to see things unravel the way they did’: FTX’s Sam Bankman-Fried
(9) FTX filed for bakruptcy. Here’s what account holders need to know about this very messy and complex bankruptcy case
Sources:
a. https://twitter.com/MarketWatch/status/1591195534869819392
(10) Tom Brady. Stephen Curry. Shaq. See the Celebrities With Ties to FTX
Sources:
Athletes and entertainers became brand ambassadors for the crypto exchange, which is now scrambling to save itself
When celebrities like Tom Brady, Stephen Curry and Shaquille O’Neal inked deals with FTX, the industry was thriving. Now their names are tied to a cryptocurrency exchange scrambling to save itself.
