On Tuesday, Sam Bankman-Fried (SBF)’s first long-form interview since FTX’s bankruptcy was published to YouTube by citizen journalist Tiffany Fong. On November 16th, the former CEO offered his perspective on a number of claims made about him since the bankruptcy, and the state of FTX US clients. He also reflected on FTT, the exchange’s native token which he maintained holds more intrinsic value than most other cryptos. What Caused FTX and FTT to Collapse Wong began by questioning SBF regarding prior claims that the CEO altered the FTX’s financial records using a “backdoor” that allowed to execute commands without alerting others. This claim was repeated multiple times by Reuters in the days after FTX’s insolvency, adding that the backdoor was used to transfer customer
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On Tuesday, Sam Bankman-Fried (SBF)’s first long-form interview since FTX’s bankruptcy was published to YouTube by citizen journalist Tiffany Fong.
On November 16th, the former CEO offered his perspective on a number of claims made about him since the bankruptcy, and the state of FTX US clients. He also reflected on FTT, the exchange’s native token which he maintained holds more intrinsic value than most other cryptos.
What Caused FTX and FTT to Collapse
Wong began by questioning SBF regarding prior claims that the CEO altered the FTX’s financial records using a “backdoor” that allowed to execute commands without alerting others. This claim was repeated multiple times by Reuters in the days after FTX’s insolvency, adding that the backdoor was used to transfer customer funds to FTX’s sister trading desk, Alameda Research.
“I certainly wasn’t building some backdoor in the system,” answered SBF during the call. “I don’t know exactly what they’re referring to.”
Specifically, Reuters had claimed on November 15th that the backdoor was built by Gary Wang – FTX’s head of engineering. Only Wang, SBF, and his innermost circle allegedly knew about the movement of funds.
Regarding FTT, SBF said that he doesn’t believe the exchange’s token was worthless. “I think its value is more economically underpinned than the average token was,” he said, because of FTT’s buy + burn mechanism, fee discounts, and cash flow.
FTT began November at over $20 but now trades for just $1.31 at writing time. Its price quickly collapsed when Binance CEO Changpeng Zhao threatened to sell $500 million worth of the token on the open market.
SBF denied claims that the token collapsed due to margin calls at Alameda and FTX (in which FTT was used as collateral), or due to the asset’s illiquidity. Instead, he said it was simply a loss of faith in the exchange that led to a massive selloff that tanked its price.
“This was the reaction to news coming out specifically surrounding FTX and Alameda, and their solvency,” he concluded.
Fears around Alameda and FTX’s solvency began to circulate after CoinDesk leaked Alameda’s balance sheet on November 2nd. The sheet showed that Alameda was overexposed to FTT, holding half of the tokens in existence.
Regrets About FTX US Bankruptcy
When FTX filed for bankruptcy on November 11th, it was joined by hundreds of affiliated companies, including both Alameda Research and FTX US.
Bankman-Fried claimed only a day prior that assets at FTX US were “not financially impacted” by the fallout, leaving many confused and angry with him the following day.
The former billionaire told Wong that he was in fact coerced into writing the filing for FTX US and that customers of the American branch still have their assets fully backed. As such, they can expect decent recoveries from bankruptcy – unlike the international exchange.
“FTX US was so fucking solvent that it could absolutely [throw] 250 million dollars to a hat on the way to bankruptcy, [and] it’s still solvent,” he said. “About 500 million over.”
FTX US stopped processing customer withdrawals on-chain as of November 11th.