On Tuesday, November 22, in a letter to staff, FTX founder Sam Bankman-Fried reported a $51 billion drop in the company’s collateral from $60 billion to $9 billion.
In his letter obtained by Bloomberg, SBF writes that a combination of crypto-currency sales, a credit crunch and a “bank run“left the collateral at only $9 billion before the company filed for Chapter 11 bankruptcy.
By then, the estimated liability had reached $8 billion. The drop in the value of FTX’s crypto assets alone cut the guarantee in half to $30 billion. In a message to employees, FTX chief Sam Bankman-Fried wrote:
“I didn’t want any of this to happen, and I would give anything to be able to go back and redo things. I did not realize the extent of the margin position, nor the magnitude of the risk posed by a hyper-correlated crash.”
The bankruptcy proceedings thus far have revealed some of FTX’s chaotic organizational practices, with deeply rooted problems. The proceedings reveal lax financial documentation and controls. It also shows payment requests approved with simple emojis in chat rooms.
In addition, the company used its funds to purchase homes and other personal property for employees and consultants. According to some reports, SBF’s parents and some FTX executives have purchased a staggering $300 million worth of property in the Bahamas. In addition, speculation is rife that Sam Bankman-Fried was behind the $600 million hack of the FTX crypto-currency exchange.
Sequoia apologizes to investors for FTX
As we know, venture capital giant Sequoia Capital was one of FTX’s largest investors. However, as the crisis unfolds, the venture capital firm’s top partners apologized to investors in a conference call on Tuesday, November 22.
During the call, Roelof Botha, the firm’s global head, said he and his colleagues repented for backing the company. Sequoia Capital had invested a total of $214 million in FTX.com and FTX.us through two funds.