SBF outlines leverage in letter of apology to FTX employees

  • The SBF asserts that investors were close to committing billions of dollars before filing for bankruptcy.
  • It turned out that the SBF and other executives were on a property shopping frenzy in the Bahamas.
  • FTX had $60 billion in warrants and $2 billion in commitments in the spring, but a market downturn has reduced the value of the collateral by 50%.

Sam Bankman-Fried (SBF), former CEO of bankrupt cryptocurrency exchange FTX, recently sent an open letter of apology to his former employees. After delivering his usual speech of apology, he went on to suggest that the company still had a chance at bailing out.

On November 23, Liz Hoffman, a journalist covering the financial industry, shared a letter reportedly sent to employees by the SBF. In that letter, he detailed the extremely precarious state the group’s guarantees and liabilities were in.

SBF Leverage details for FTX

According to Bankman-Fried, this spring, FTX had approximately $60 billion in warrants and $2 billion in liabilities. However, the market crash caused the value of the security to drop by 50%.

A “drying up” of credit in the cryptocurrency sector has led to a drop in the value of FTX’s collateral to $25 billion, which has increased its estimated liability to $8 billion. After another drop in November, the value of the collateral “dropped about another 50% in a very short period of time” from an estimated $17 billion.

Bankman-Fried said another $8 billion in collateral was lost to a bank run in November, which was triggered by what he called the “attacks.”

However, the SBF shared details that would change the outcome in favor of FTX. The former crypto billionaire speculated that FTX may still have some value. According to him, investors were willing to put billions of dollars ahead Bankruptcy has been filed. he wrote:

"We likely could have raised significant funding; potential interest in billions of dollars in funding came in roughly eight minutes after I signed the Chapter 11 docs."

The sum of these funds, along with guarantees and interest left over from other partners, he said, would have returned “significant value to customers and save the business.”

When the cryptocurrency exchange FTX went out of business, it shocked the entire industry. Even cryptocurrency investors who did not have any money in the exchange itself were affected.

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