Was Sam Bankman-Fried Proven Right About FTX’s Solvency?

Bankrupt
crypto
exchange
FTX
has

recovered
billions
of
dollars
more
than
it
needs
to
make
the
victim’s
of
Sam
Bankman-Fried’s
theft
whole,
according
to
the
latest
bankruptcy
plan
announced
on
Tuesday.
Customers
will
receive
$1.18
for
every
dollar’s
worth
of
crypto
assets
they
held
on
the
exchange
at
the
time
of
collapse
in
November
2022,
plus
interest.

This
result
–
rare
in
the
world
of
bankruptcies,
where
creditors
typically
receive
pennies
on
the
dollar
–
has
raised
a
poignant
question
for
some:
Was
Sam
Bankman-Fried
right
all
along?

Note:
The
views
expressed
in
this
column
are
those
of
the
author
and
do
not
necessarily
reflect
those
of
CoinDesk,
Inc.
or
its
owners
and
affiliates.


This
is
an
excerpt
from
The
Node
newsletter,
a
daily
roundup
of
the
most
pivotal
crypto
news
on
CoinDesk
and
beyond.
You
can
subscribe
to
get
the
full



newsletter
here.

For
instance,
Bloomberg’s
Matt
Levine
opened
a
recent
edition
of
the

(always
excellent)
“Money
Stuff”
newsletter
getting
straight
to
the
point:
“FTX
was
…
illiquid
but
solvent?”
That
is,
in
a
way,
a
very
simple
and
direct
way
of
stating
what
SBF,
who
was
recently
sentenced
to
25
years
in
prison
for
one
of
the
largest
financial
heists
ever,
has
been
saying
for
years.

See
also:



Could
Sam
Bankman-Fried’s
Saga
Happen
Without
Crypto?

To
make
it
brief,
in
the
days
leading
up
to
FTX’s
bankruptcy
on
Nov.
11,
2022,
SBF
was
frantically
trying
to
shore
up
a
gigantic
hole
in
his
company’s
balance
sheet
by
raising
funds
basically
from
anyone
he
could.
This
reportedly
includes
everyone
from
Silicon
Valley
VCs,
Saudi
money
men
and
even
SBF’s
archrival
ex-CEO
of
Binance
Changpeng
Zhao
(who
reneged
on
a
handshake
buyout
deal
after
reviewing
the
state
of
FTX’s
finances,
only
speeding
up
the
ongoing
run
on
the
exchange).

He
was
trying
to
raise
this
money
1)
because
SBF
and
his
inner
circle
had
become
painfully
aware
of
a
shortfall
in
capital
needed
to
meet
all
customer
withdrawals
(a
balance
reportedly
shown
to
prospective
investors
showed
the
exchange
only
had

$900
million
in
liquid
assets)
and
2)
because
(and
this
is
debatable)
he
believed
–
or
said
he
believed
–
that
there
actually
was
enough
capital,
it
was
just
illiquid.
To
wit:

“FTX
is
fine.
Assets
are
fine,”
Bankman-Fried
infamously
tweeted
out
on
Nov.
7
after
being
confronted
by

FTX
co-founder
Gary
Wang
about
the
exchange’s
$8
billion
hole
as
customer
withdrawals
began
to
pick
up
following
Zhao’s
announcement
that
he’d
sell
Binance’s
FTT
stack.

From
the
beginning
of
his
ill-fated
“media
tour”
to
the
end
of
his
trial,
SBF
routinely
characterized
FTX’s
implosion
as
due
to
an
accounting
error
–
in
particular
a
“confusing
internal
account”
that
made
it
seem
to
him
that
FTX
was
on
more
solid
footing.
Plus,
as
Michael
Lewis
noted
in
the
hagiography
“Going
Infinite,”
SBF
privately
estimated
his
personal
worth
at
over
$100
billion,
though
that
was
before
the
price
of
FTT,
SOL
and
other
“Sam
Coins”
cratered.

It
was
actually
this
insistence
that
he
could
have
rescued
FTX
had
he
not
declared
bankruptcy,
and
unwillingness
to
take
responsibility
for
his
crime,
that
led
to
his
lengthy
sentence.
“In
30
years,
I’ve
never
seen
a
performance
like
that,”
Judge
Lewis
Kaplan
said
during
the
sentencing
hearing,
describing
SBF’s
evasiveness
and
remorselessness.

But
just
because
someone
believes
something
doesn’t
make
it
true,
no
matter
how
many
Substack

posts
they
write
or

spreadsheets
they
create.
John
J.
Ray
III,
current
FTX
CEO
overseeing
the
bankruptcy,
says
over
the
past
17
months
the
firm
was
able
to
recover
between
$14.5
billion
and
$16.3
billion
in
assets
that
weren’t
on
the
exchange
at
the
time
it
collapsed.

While
it
will
likely
take
access
to
documents
that
aren’t
actually
publicly
available,
including
FTX’s
(abysmal)
financial
statements
before
the
collapse
and
for
today
to
conclusively
prove
this;
it’s
likely
this
recovery
is
due
mostly
to
the
rising
price
of
crypto
assets.
Although
JJR’s
well-paid
legal
team
likely
put
in
a
lot
of
effort
to
recover
funds
from
“dozens
of
private
entities,”
it
likely
doesn’t
add
up
to
billions
and
billions
of
dollars.

See
also:



The
Downfall
of
FTX:
The
Crypto
Industry
Reacts

Anthropic,
for
instance,
one
of
SBF’s
lucky
bets
in
AI,
got
the
firm
a
return
of
$884
million
–
a
windfall,
but
likely
the
biggest
non-crypto
sale
FTX
made.
FTX
also
sold
off
38
Bahamian
properties
for
around
$199
million,
and
was
able
to
recover
nearly
$2.6
billion
in
cash.

In
comparison,
the
estate
sold
off
$1.9
billion
worth
of
deeply
discounted
SOL
recently,
and
apparently
still
holds
$7.5
billion
worth
of
locked-up
tokens.
Those
tokens
were
worth
less
than
$500
million
at
the
time
of
FTX’s
collapse.
In
total,
FTX
raised
about
$5
billion
by
selling
tokens,
and
it
expects
to
raise
another
$4.4
billion
over
the
next
few
months.

This
to
me
all
seems
like
FTX
wasn’t
actually
solvent
at
the
time
it
collapsed
and
that
it
could
repay
the
$8
billion
in
missing
customer
funds
if
only
SBF
had
the
ability
to
quickly
sell
off
all
of
its
property,
equity
investments
and
crypto
(without
tanking
prices
even
further).
But
instead
due
to
the
subsequent
bull
run,
FTX
became
solvent.

Customers
are
being
made
whole,
not
in
crypto
assets,
of
which
there
is
still
a
shortfall
(i.e.
there
is
not
enough
BTC
to
go
around
to
pay
back
all
customer
BTC
claims),
but
in
the
dollar
value
of
their
accounts
in
November
2022
prices.
It’s
a
lucky
break
that
the
market
rebounded
enough
so
that
the
fraction
pays
for
the
whole.

But
SBF
didn’t
have
the
benefit
of
waiting
several
months
to
see
if
crypto
would
rise
from
the
ashes.
And
his
argument
that
FTX
only
had
an
illiquidity
problem
is
patently
absurd.