“I was on the cover of every magazine, and FTX was the darling of Silicon Valley,” said the former CEO on the crypto firm’s path to bankruptcy.
Former FTX CEO Sam Bankman-Fried admitted he was wrong when he estimated the exchange’s leverage to be much higher than $5 billion. He now believes it was closer to $13 billion.
The leverage at FTX was a lot, and it was built up from a lot of money. This meant that the FTX company had a lot of money, but it also meant that there was a lot of risk. The former CEO said that during a crypto market crash, people were withdrawing their money from their accounts very quickly because there was no buying or selling of cryptocurrencies. This led to a bank run, and as a result, $4 billion was taken out of people’s accounts each day.
“I was wrong,” said Bankman-Fried. “Leverage wasn’t ~$5b, it was ~$13b. $13b leverage, total run on the bank, total collapse in asset value, all at once. Which is why you don’t want that leverage.”
Officials in three different countries are investigating the collapse of a major exchange. Authorities reportedly talked about sending Bankman-Fried to the U.S. to question her. Some people are saying that the person who was extradited may have been involved in something that happened in a hearing that we are going to have in December. We don’t know for sure, but we are expecting to hear from them.
FTX Group started bankruptcy proceedings by filing for Chapter 11 on Nov. 11 in the District of Delaware. The filing included more than 130 companies, including FTX Trading, FTX US and Alameda Research. According to subsequent filings in bankruptcy court, the exchange could be accountable to more than 1 million creditors.
