{"id":9722,"date":"2023-01-12T15:38:46","date_gmt":"2023-01-12T15:38:46","guid":{"rendered":"http:\/\/cryptoheretostay.com\/?p=9722"},"modified":"2023-01-12T15:38:48","modified_gmt":"2023-01-12T15:38:48","slug":"sbf-reveals-his-side-of-the-ftx-story-blames-cz-targeted-attack-against-ftx","status":"publish","type":"post","link":"https:\/\/cryptoheretostay.com\/?p=9722","title":{"rendered":"SBF reveals his side of the FTX story, blames CZ, targeted attack against FTX"},"content":{"rendered":"<p> <script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"crypto\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n   <\/p>\n<p>Former FTX CEO Sam Bankman-Fried (SBF) launched a Substack report in which he detailed his version of accounts of what happened at FTX.<\/p>\n<p>SBF claimed that \u201cno funds were stolen\u201d and attributed the collapse to Alameda\u2019s inability to hedge against a market crash adequately.<\/p>\n<h2>SBF recovery plan for FTX<\/h2>\n<p>SBF took to Twitter earlier on Jan. 12 to argue that FTX could still recover \u2014 SBF\u2019s Substack report supports these claims.<\/p>\n<p>The former CEO \u2014 who is currently confined to his parent\u2019s house according to the terms of his bail \u2014 aligned the failure of FTX to \u201csomewhere between that of Voyager and Celsius.\u201d<\/p>\n<p>He gave three reasons for the \u201cimplosion,\u201d stating Alameda had $100 billion in assets, which we subjected to both a market crash and \u201can extreme, quick, targeted crash precipitated by the CEO of Binance.\u201d<\/p>\n<p>\u201ca) Over the course of 2021, Alameda\u2019s balance sheet grew to roughly $100b of Net Asset Value, $8b of net borrowing (leverage), and $7b of liquidity on hand.<\/p>\n<p>b) Alameda failed to sufficiently hedge its market exposure. Over the course of 2022, a series of large broad market crashes came\u2013in stocks and in crypto\u2013leading to a ~80% decrease in the market value of its assets.<\/p>\n<p>c) In November 2022, an extreme, quick, targeted crash precipitated by the CEO of Binance made Alameda insolvent.\u201d<\/p>\n<p>Similarities to the impact of the Three Arrows Capital (3AC) collapse on exchanges such as Celsius and Voyager were made to Alameda\u2019s role in the downfall of FTX.<\/p>\n<p>However, SBF did not directly address the argument that Alameda should never have had access to customer funds in the first place when making the comparison.<\/p>\n<h2>FTX.US solvency<\/h2>\n<p>SBF made a strong statement regarding the state of FTX.US, claiming that:<\/p>\n<p>\u201cIt\u2019s ridiculous that FTX US users haven\u2019t been made whole and gotten their funds back yet.\u201d<\/p>\n<p>FTX.US allegedly had over $350 million cash \u201cbeyond customer balances,\u201d according to SBF.<\/p>\n<p>Below is a copy of the spreadsheet shared by the former CEO in the report. The figures represent the company\u2019s state at the time of SBF\u2019s removal.<\/p>\n<p>Source: Sambf.Substack<\/p>\n<p>The potential for FTX.US customers to be made whole has been consistently backed by SBF, as he claimed the U.S. arm of the company has never been insolvent.<\/p>\n<h2>Legal conspiracy<\/h2>\n<p>SBF continued his narrative that the legal firms involved in the insolvency have conspired to force through bankruptcy proceedings to garner legal fees.<\/p>\n<p>\u201c[Sullivan &amp; Crowell] and the [General Council] were the primary parties strong-arming and threatening me into naming the candidate they themselves chose as CEO of FTX.\u201d<\/p>\n<p>While legal firm Sullivan &amp; Crowell maintained that it \u201chad a limited and largely transactional relationship with FTX,\u201d SBF revealed that he was close enough to the firm to work out of its offices when he was in New York.<\/p>\n<p>U.S. Senators \u2014 including Sen. Elizabeth Warren \u2014 have publicized their concerns over Sullivan &amp; Crowell\u2019s involvement in the case going forward.<\/p>\n<p>A letter published by a group of Senators stated there were \u201cconcerns about the impartiality\u201d of the firm.<\/p>\n<p>\u201cPut bluntly, the firm is simply not in a position to uncover the information needed to ensure confidence in any investigation or findings.\u201d<\/p>\n<h2>SBF denies stealing from customers<\/h2>\n<p>In the report, SBF backed his \u2018not guilty\u2019 plea by publicly stating that he did not steal user funds and is willing to use his Robinhood shares to make customers whole.<\/p>\n<p>\u201cI didn\u2019t steal funds, and I certainly didn\u2019t stash billions away. Nearly all of my assets were and still are utilizable to backstop FTX customers.\u201d<\/p>\n<p>In contradiction to the claims that SBF appropriated user deposits to fund risky bets by Alameda Research, the former CEO pointed to global market conditions as the root cause of the collapse.<\/p>\n<p>The table below showcases Alameda\u2019s balance sheet in billions, according to SBF.<\/p>\n<p>Source: Sambf.Substack<\/p>\n<p>Based on the information, SBF alleges that its holdings of \u201cSOL alone was enough to cover the net borrowing.\u201d<\/p>\n<p>SBF argued that Alameda\u2019s \u201c~$8b illiquid position\u2026 seemed reasonable and not very risky.\u201d However, after a 94% decline in net asset value during 2022, \u201cthe hundred billion of assets had only a few billion dollars of hedges,\u201d which was insufficient to support its needs.<\/p>\n<p>Instead of taking any actual ownership of the events, SBF recounted a list of macro factors that affected Alameda\u2019s position, including taking a shot at former Alameda co-CEO, Sam Trabucco.<\/p>\n<p>\u201c\u2013BTC crashed 30%<br \/>\u2013BTC crashed another 30%<br \/>\u2013BTC crashed another 30%<br \/>\u2013rising interest rates curtailed global financial liquidity<br \/>\u2013Luna went to $0<br \/>\u20133AC blew out<br \/>\u2013Alameda\u2019s co-CEO quit<br \/>\u2013Voyager blew out<br \/>\u2013BlockFi almost blew out<br \/>\u2013Celsius blew out<br \/>\u2013Genesis started shutting down<br \/>\u2013Alameda\u2019s borrow\/lending liquidity went from ~$20b in late 2021 to ~$2b by late 2022\u201d<\/p>\n<p>Alongside these events, SBF cited liquidity issues in the crypto markets as responsible for Alameda\u2019s troubles.<\/p>\n<p>\u201cLiquidity dried up\u2013in borrow-lending markets, public markets, credit, private equity, venture, and pretty much everything else. Nearly every liquidity source in crypto\u2013including nearly all of the borrow-lending desks\u2013blew out over the course of the year.\u201d<\/p>\n<p>With the scene set to showcase Alameda\u2019s strong position of roughly $10 billion in net asset value in October 2022 in a turbulent bear market, SBF continued the article to go on the offensive against Binance CEO CZ.<\/p>\n<h2>November 2022<\/h2>\n<p>SBF began a section titled \u2018The November Crash\u2019 by singling out C.Z.\u2019s tweets and P.R. campaign against FTX.<\/p>\n<p>\u201cThen came CZ\u2019s fateful tweet, following an extremely effective months-long PR campaign against FTX\u2013and the crash.\u201d<\/p>\n<p>Until November 2022, SBF claimed that Alameda\u2019s hedges \u201cto the extent they existed, had worked.\u201d However, what happened next was allegedly targeted directly at FTX and Alameda.<\/p>\n<p>\u201cThe November crash was a targeted attack on assets held by Alameda, not a broad market move.\u201d<\/p>\n<p>It was on Nov. 7, 2022 and Nov. 8, 2022 that SBF believes that Alameda first became \u201cclearly insolvent.\u201d The table below details Alameda\u2019s balance sheet at the time of the Chapter 11 filing, according to SBF.<\/p>\n<p>Source: Sambf.Substack<\/p>\n<p>Once Alameda became insolvent, SBF argued that the pursuing bank run tipped the balance causing the group to collapse. At this point in the report, SBF finally acknowledges the direct link between Alameda and FTX as he confirmed that \u201cAlameda had a margin position open on FTX; and the run on the bank turned that illiquidity into insolvency.\u201d<\/p>\n<p>However, SBF failed to address whether the Alameda margin position was related to customer funds or FTX-owned assets. In fact, SBF appears to be positioning the event to make comparisons with 3AC, against which no criminal charges have been filed. SBF is facing up to 100 years in jail for his involvement in the collapse.<\/p>\n<p>\u201cNo funds were stolen. Alameda lost money due to a market crash it was not adequately hedged for\u2013as Three Arrows and others have this year. And FTX was impacted, as Voyager and others were earlier.\u201d<\/p>\n<p>SBF ended the report by stating that he had intended to detail the report\u2019s content at the U.S. House Financial Services Committee on Dec. 13, 2022, but was unable due to his arrest.<\/p>\n<p>SBF has promised more information in the future. In addition, updates will likely be made to the new substack account, which can be found here.<\/p>\n<h3>Read Our Latest Market Report<\/h3>\n<p><script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"bitcoin\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n<br \/><a href=\"https:\/\/cryptoslate.com\/sbf-claims-no-funds-were-stolen-blames-cz-for-collapse-in-detailed-report-on-ftx-collapse\/\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Former FTX CEO Sam Bankman-Fried (SBF) launched a Substack report in which he detailed his version of accounts of what happened at FTX. SBF claimed that \u201cno funds were stolen\u201d and attributed the collapse to Alameda\u2019s inability to hedge against a market crash adequately. SBF recovery plan for FTX SBF took to Twitter earlier on [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":9723,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_wp_rev_ctl_limit":""},"categories":[3],"tags":[],"class_list":["post-9722","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ethereum-news"],"_links":{"self":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/9722","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9722"}],"version-history":[{"count":1,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/9722\/revisions"}],"predecessor-version":[{"id":9724,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/9722\/revisions\/9724"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/media\/9723"}],"wp:attachment":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9722"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9722"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9722"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}