Sam Bankman-Fried, the founder of the bankrupt cryptocurrency exchange FTX, said his biggest mistake during the company’s $8 billion collapse was handing over control to new management. In an interview with Mother Jones, he claimed this decision cost him a last-minute opportunity to save the firm from bankruptcy. Bankman-Fried, who once led the $32 billion FTX exchange, is facing seven felony charges related to the collapse of FTX and Alameda Research in November 2022, which resulted in an $8.9 billion loss of investor funds.
He said signing over the company to new leadership on November 11, 2022, was his “single biggest mistake.”
Minutes after handing over control, Bankman-Fried received a call about a potential external investment that could have saved FTX from bankruptcy, but it was too late to revoke his signature. The new management filed for Chapter 11 bankruptcy on the same day and hired the law firm Sullivan & Cromwell (S&C) for legal assistance. Bankman-Fried was arrested in the Bahamas on December 12, 2022, after U.S. prosecutors filed criminal charges against him.
He was extradited to the U.S. in January 2023.
Bankman-Fried’s regretful decision
FTX collapsed due to the misappropriation of user funds, which Bankman-Fried transferred without consent to fund trading losses at Alameda Research, FTX’s sister company.
Two days before the bankruptcy filing, an S&C attorney had emailed Bankman-Fried proposing to hire new management as a chief restructuring officer “in a possible Chapter 11.”
In February 2024, a group of FTX creditors filed a lawsuit against Sullivan & Cromwell, alleging that the firm played a role in FTX’s multibillion-dollar fraud and financially benefited from it. The lawsuit sought damages for aiding and abetting fraud and breach of fiduciary duty. S&C earned over $171.8 million in legal fees from the FTX bankruptcy by June 27, 2024.
Nearly three years after the exchange’s collapse, FTX creditors are still awaiting full repayment. The FTX estate has reimbursed a total of $7.8 billion to creditors through a series of payments. The exchange is estimated to have up to $16.5 billion in recovered assets available for repayment and plans to repay at least 98% of customers 100% of the value in their accounts as of November 2022.
The FTX collapse triggered a wave of bankruptcies across the crypto industry, ushering in one of the longest bear markets in the sector’s history, with Bitcoin falling to as low as $16,000 following the fallout.
