FTX founder, Sam Bankman-Fried wrote a letter to the FTX employees where he addressed his wrongdoings which led to the downfall of one crypto giant, FTX. In a letter, he addressed the fact that the massive withdrawals by Almeda Research led to the failure of FTX, both of which are his companies. He also said that he had no idea of the margin positions. He said that along with the idea of margin positions, he failed to address the magnitude of the risk related to hyper-correlated crashes. In the letter, Bankman-Fried shared his emotions which were related to FTX and the employees at FTX. He said that the FTX and the employees were like his family.
FTX was one of the largest crypto exchange platforms in the world, making it a multi-billion dollar company. But recent developments suddenly brought FTX from a multi-billion dollar company to a bankrupt company. The company has filed for bankruptcy and the hearing is still going on. The outcomes of the bankruptcy hearing are not looking good for FTX and Sam Bankman-Fried as the company is facing challenges such as missing assets and hack situations. In the middle of this, Bankman-Fried’s letter to FTX employees has created an interesting angle in this situation. General operations at FTX involved clients borrowing money which was used to increase their bets on cryptocurrencies. Alameda Research, due to such practice, was able to borrow an exceptional amount of money from FTX, which Bankman-Fried had no idea and hence he failed to monitor this event.
Based on the letter, it was revealed that Almeda started with the borrowed amount of $2 billion, which was backed by the collateral of $60 billion. But by the time FTX collapsed to nothing, this borrowed amount had risen to $8 billion with collateral of only $9 billion. This was an unacceptable practice from FTX and Almeda Research, which many believe led to the demise of FTX. Bankman-Fried agreed with this foul practice while saying that he lost track of the most important things that are needed in a company's growth. Since the downfall of FTX, Bankman-Fried had made many public announcements regarding how his company collapsed and how he failed to keep track of where the company was headed. But this letter to FTX employees is the most detailed description of what happened during the period of FTX’s downfall.
However, the recent developments in FTX’s bankruptcy case are pointing at a different side of this coin. According to recent events, the lawyers appointed by the new managers of FTX said that Bankman-Fried was operating the company as per his own rules as if it was his “personal fiefdom”. The lawyers from new managers of FTX told the US bankruptcy court in Delaware that the Bankman-Fried and his group used to spend a significant amount of the company's financial resources on parties and vacations. They accused Bankman-Fried of clearly misusing the customer funds. However, at the end of the letter, Bankman-Fried said that the employees of FTX were his family and he has lost that family.