Sam Bankman-Fried is once more difficult the core narrative of his downfall: that FTX was bancrupt when it collapsed in November 2022.
In a 15-page report written from jail and dated Sept. 30, the convicted founder claimed the change “was by no means bancrupt” however merely trapped in a “liquidity disaster” after clients pulled $5 billion in two days.
He argued that FTX and its buying and selling arm, Alameda Analysis, collectively held $25 billion in property and $16 billion in fairness worth towards about $13 billion in liabilities. Based on him, his companies had sufficient to repay clients in full if the corporate had been allowed to proceed working.
He wrote:
“FTX at all times had enough property to repay all clients, in variety, and supply vital worth to fairness holders as nicely. That’s what would have occurred if attorneys hadn’t taken over FTX.”
As an alternative, Bankman-Fried blames exterior counsel and new CEO John J. Ray III for pushing FTX into Chapter 11 earlier than rescue financing may very well be accomplished.
His framing of FTX’s challenge as a liquidity downside, somewhat than insolvency, serves to melt allegations of fraud and redirects blame towards the authorized staff that froze operations.
If accepted, it transforms the implosion from one in every of misused deposits right into a fixable financial institution run minimize brief by overzealous attorneys.
Solvency by hindsight
In his report, Bankman-Fried treats FTX’s frozen portfolio as if it had survived intact by your complete 2023–25 market restoration.
He reprices the bankrupt agency’s holdings in Solana, Robinhood, Sui, Anthropic, and even the now-worthless FTT token at present values, suggesting that by the tip of this 12 months, the basket could be price roughly $136 billion. This might simply cowl the $25 billion he cites in buyer and creditor claims.
From there, he insists, everybody might have been paid “in full, in variety,” and fairness buyers would nonetheless have walked away with billions.
Nevertheless, that reasoning is flawed as it’s “solvency by bull market.”
Chapter legislation doesn’t enable a failed firm to maintain buying and selling for years within the hope that rising costs will restore its steadiness sheet. As soon as Chapter 11 is filed, claims are frozen on the petition date, transformed to {dollars}, and pursued by restoration, not hypothesis.
As former FTX normal counsel Ryne Miller identified:
“That week in November 2022, property available have been nothing close to ample, and the founders have been fabricating asset lists (and desperately chasing new buyers). The cash have been gone, of us. Your cash have been gone. That’s why chapter occurred.”
Because of this a lot of FTX’s portfolio was constructed with commingled buyer funds. No courtroom would have permitted these property to stay in danger whereas administration gambled on a rebound.
Bankman-Fried’s math solely works if regulators and collectors had let an change below prison and liquidity stress hold working usually for 2 extra years, a state of affairs that borders on fantasy.
The FTX reboot that by no means occurred
The identical optimism underlies his declare that FTX was “shut down too early.”
Bankman-Fried insists the change was nonetheless incomes about $3 million a day and almost $1 billion a 12 months when Ray halted operations. He additionally maintains that administration had recognized $6 billion to $8 billion in emergency financing that would have closed the opening “by the tip of November 2022.”
That line of argument assumes FTX remained a going concern, that buying and selling would have continued, clients would have stayed, and the enterprise portfolio might have prevented fire-sale reductions.
However by mid-November, the change confronted a whole collapse of confidence. Counterparties have been fleeing, licenses have been suspended, and legislation enforcement companies have been circling. Below these circumstances, holding FTX reside would have risked deeper losses and regulatory backlash.
Nevertheless, business consultants famous that the chapter property selected the safer route of freezing accounts, preserving what remained, and pursuing orderly asset restoration below courtroom supervision.
The truth is, Miller instructed that the chapter property’s choice helped salvage some worth, somewhat than destroying it.
Based on him, the property’s disciplined administration of FTX’s Solana and Anthropic stakes, each of which appreciated sharply within the restoration, turned one of many major causes collectors might now be made complete.
Because of this Bankman-Fried’s portrait of a worthwhile agency unfairly shuttered by attorneys overlooks these realities. His assumptions about ongoing income and investor confidence belong to a world that not exists as soon as belief evaporates.
Competing timelines, competing truths
At its core, the dispute facilities on which timeline defines the corporate’s actuality.
Bankman-Fried measures solvency by 2025 asset costs and a enterprise that by no means closed. The chapter property measures it by what remained in November 2022.
On the property’s timeline, FTX confronted an $8 billion gap, property have been illiquid or overstated, and contemporary funding efforts had stalled. Freezing operations and changing claims to {dollars} have been the one honest course.
On Bankman-Fried’s timeline, the act of intervention prompted the harm as attorneys “commandeered” the corporate, bought property right into a rising market, incurred almost $1 billion in charges, and “destroyed” over $120 billion in hypothetical upside.
That inversion turns the cleanup into the perpetrator. It reframes a typical court-supervised wind-down as a hostile takeover that allegedly vaporized future worth.
But the central truth stays unchanged: when clients demanded their cash, FTX was unable to pay. Every little thing else is retroactive storytelling.
As blockchain investigator ZachXBT frames it:
“SBF is simply making an attempt to weaponize the truth that each FTX asset / funding has gone up from picobottom Nov 2022 costs after they factually couldn’t pay out customers on the time of chapter and as an alternative level the chapter staff because the true villain.”
