Sun. Jun 4th, 2023

The collapse of FTX was engineered by Changpeng Zhao, head of rival Binance, whose strategy may have worked better than he had expected, Sam Bankman-Fried, the founder and former chairman of the cryptocurrency exchange now operating under bankruptcy-court protection tells Forbes in an exclusive interview.
“My guess is he played me, he played it well,” Bankman-Fried tells Steven Ehrlich, director of research for Forbes Digital Assets in a live-streamed session. “I think he probably did better than he thought he would. I don’t think he thought this was going to be the outcome. I think he thought it was going to be damaging but not this damaging.”
Zhao, widely known as CZ, put a spotlight on FTX with a November 6 posting on Twitter, in which he said he would liquidate tokens issued by Bankman-Fried’s exchange because of “recent revelations that have come to light.” That exacerbated market concerns about the financial health of FTX and was followed by a quickly withdrawn rescue offer by Binance three days later.
Bankman-Fried says that in retrospect he does not think the offer was legitimate, in part because CZ “cared surprisingly little about the terms” including the price.
FTX filed for bankruptcy protection on November 11, and Bankman-Fried says within hours after that “multiple” rescue offers came rolling in, most of which took the form of lending that could be converted into equity, largely from outside investors. During the financial crisis of 2008 Warren Buffett famously supported ailing Goldman Sachs in a deal that included preferred shares and warrants convertible into equity.
The terms were “fairly favorable” to the prospective lenders, he adds, but most would have allowed him to remain with the company though under the oversight of a higher-ranking executive. Bankman-Fried has said his inattention to risk management was a reason for the FTX failure.
Bankman-Fried, who had majority control of the FTX companies, says that he was pressured into resigning by “a tight-knit group of lawyers and law firms that were coordinating with each other, I believe, on their messages to me.” He said he couldn’t speak to their motives, but did mention some $700 million in legal fees associated with Enron’s bankruptcy. Bankman-Fried would not further identify the lawyers but repeated previous assertions that he almost immediately regretted agreeing to step down and seek bankruptcy protection and that the company’s U.S. subsidiary, FTX US, was solvent and should not have been included in the filing.
In previous interviews over the past few weeks, Bankman-Fried has admitted that customer funds were not properly segregated, and that led to a cash crunch when FTX was overwhelmed by withdrawal requests.
A lot of the pressure on the company seems to have come from the affiliated Alameda Research hedge fund, which he says had improperly constructed hedges that did not insulate it from sliding cryptocurrency prices last month, which were in part a reaction to the crisis at FTX. Bankman-Fried cites an “idiosyncratic market” that specifically targeted Alameda.
Asked about how he envisions his legacy, he says, “I hope it’s anything but what happened last month. I worry that that’s what it will be, and I think that is what it will be if I don’t do something to make it up.”


By admin

Leave a Reply

Your email address will not be published. Required fields are marked *