SBF Maintains Innocence in FTX Collapse, Blames Financial Turmoil

• Sam Bankman-Fried (SBF), the founder and former Chief Executive Officer of bankrupt FTX Derivatives Exchange, maintained his innocence with respect to stealing the trading platform users’ funds in a Thursday morning Substack letter.
• SBF argued that the collapse of FTX and its sister trading firm Alameda Research is a function of the broader turmoil that the financial industry has recorded over the past year.
• SBF noted that over the course of 2021, the Net Asset Value of Alameda Research grew to $100 billion with $8 billion of net borrowing (leverage), and $7 billion of liquidity on hand, but the firm failed to hedge its market exposure and by implication, lost approximately 80% of its value over that time span.

Sam Bankman-Fried, the founder and former Chief Executive Officer of bankrupt FTX Derivatives Exchange, took to Substack on Thursday morning to maintain his innocence with respect to stealing the trading platform users’ funds as alleged by Federal Prosecutors. In his letter, Bankman-Fried argued that the collapse of FTX and its sister trading firm Alameda Research is a function of the broader turmoil that the financial industry has recorded over the past year.

He noted that over the course of 2021, the Net Asset Value of Alameda Research grew to $100 billion with $8 billion of net borrowing (leverage), and $7 billion of liquidity on hand. However, the firm failed to hedge its market exposure and by implication, lost approximately 80% of its value over that time span. Though SBF accepted responsibility for the collapse of the company, he maintained that the allegations of stealing user funds were unfounded.

In his letter, SBF also explained that the firm’s losses were exacerbated by the fact that much of the firm’s capital was tied up in illiquid options and futures contracts, which are difficult to exit quickly in times of market turmoil. He noted that Alameda Research was unable to liquidate these positions in time to meet its margin calls, and as a result, suffered heavy losses.

In conclusion, SBF maintained his innocence with respect to stealing user funds and argued that the collapse of FTX and Alameda Research was a function of the broader turmoil in the financial industry over the past year. He also noted that the firm’s losses were worsened by the fact that much of its capital was tied up in illiquid options and futures contracts, which were difficult to exit quickly in times of market turmoil.