Sam Bankman-Fried, the convicted founder of FTX, is once again attempting to reframe the narrative surrounding his crypto exchange's dramatic collapse in November 2022. From prison, Bankman-Fried issued a detailed report asserting that FTX was never insolvent, but merely experienced a "liquidity crisis" triggered by a rapid withdrawal of funds. This challenge aims to shift blame from alleged fraud to the legal team that took over FTX, transforming its implosion into a fixable bank run allegedly cut short by premature intervention.
Bankman-Fried's Contested Claims
In his 15-page report, Bankman-Fried contends that FTX and its sister trading firm, Alameda Research, held a combined $25 billion in assets against $13 billion in liabilities, yielding $16 billion in equity value. He argues that these holdings were more than sufficient to repay all customers "in full, in kind," if only the company had been allowed to continue operations instead of being pushed into Chapter 11 bankruptcy. His argument relies heavily on "solvency by hindsight," where he re-prices FTX's frozen portfolio of assets—including Solana, Robinhood, and Anthropic—at their significantly higher current market values, projecting a potential worth of $136 billion by late 2023. He also claims the exchange was profitable, earning $3 million daily, and that $6 billion to $8 billion in emergency financing was within reach before the legal takeover.
The Reality of Insolvency and Legal Intervention
However, Bankman-Fried's optimistic projections face strong rebuttals from bankruptcy experts and former FTX insiders. Critics highlight that bankruptcy law freezes claims at the petition date, prohibiting a failed company from gambling on future market recoveries. Furthermore, much of FTX's portfolio was built using commingled customer funds, making it legally impossible for regulators and creditors to allow continued risky operations during a criminal investigation and a severe liquidity crisis. Former FTX general counsel Ryne Miller explicitly stated that "assets on hand were nothing near adequate" in November 2022, and customer coins "were gone," necessitating bankruptcy. The notion that FTX was "shut down too early" also overlooks the grim reality of mid-November 2022. The exchange faced a complete loss of confidence, with counterparties fleeing, licenses suspended, and law enforcement circling. In such a volatile environment, continued operations would have invited deeper losses and severe regulatory backlash. Ironically, the bankruptcy estate's disciplined management of key assets, such as FTX's stakes in Solana and Anthropic, has played a crucial role in their appreciation, potentially enabling creditors to be made whole—a direct contradiction to Bankman-Fried's assertion that the intervention destroyed value. Ultimately, while Bankman-Fried presents a narrative of hypothetical future value, the undeniable truth remains: FTX was unable to meet customer withdrawal demands when it collapsed.
