Cai Lian News, January 13 (Editor Shi Zhengcheng) On Thursday morning local time, FTX Exchange founder Sam Bankman-Fried (abbreviated as SBF) published a long blog, which is also regarded as his platform for fighting the prosecution by US prosecutors.
(Source: SBF Blog)
After being extradited back to the United States late last year, SBF was charged by prosecutors with eight criminal counts, including wire fraud, securities fraud, and money laundering. If convicted in full, SBF faces up to 115 years in prison. According to a Manhattan court's ruling earlier this year, the case will begin on Oct. 2 after SBF pleaded not guilty to all charges. During this time, SBF was released on bail on $250 million and lived with his parents in California.
It is worth mentioning that a number of FTX executives who have worked with SBF for a long time have reached plea negotiations with the prosecution and testified that SBF himself has been involved in criminal activities for a long time.
SBF, who stayed in his parents' home, also began to continue his efforts to argue that "I'm not a liar." SBF stressed that it did not steal money or hide billions of dollars in assets.
Opinion 1: The bankruptcy is FTX International US users have no losses
SBF stressed that to this day, FTX America still has sufficient assets, and that it is FTX International, a company that operates mainly in the Bahamas, that is, the bankruptcy. When control of his FTX U.S. was handed over to the bankruptcy liquidation team, the net assets on the books were $350 million more than the user's net asset balance.
So SBF also accused American users of not getting their money back so far, which is absurd.
Opinion 2: If it were not for the pressure of the law firm, the company would still have a chance to save it
In response to Sullivan Cromwell's claim that its "relationship with FTX is limited and primarily transactional," SBF bluntly said the lawyers were not telling the truth.
SBF said the firm is one of FTX International's two major law firms and FTX America's main law firm. So the firm is involved in many important legal compliance matters for both companies. The firm also forced SBF to appoint its chosen person as CEO of FTX Group, then filed for bankruptcy protection and retained the firm as a lawyer for creditors.
Most importantly, when the new management team took over, even FTX International, which had just experienced a run, still had $8 billion in various assets (but with different liquidity). Even after FTX filed for bankruptcy restructuring, there was still a large amount of external funds intended to be invested in FTX, and more than $4 billion of letters of intent were signed. If FTX International had been given a few more weeks at that time, it would have been entirely possible to activate the liquidity of assets and equity and fill the hole in insolvency.
SBF claims that previous efforts were in vain after Sullivan Cromwell "forced" FTX to file a bankruptcy filing. But SBF, which faces jail time, also stressed that if FTX restarts again, there is a chance that investors can get all their deposits back.
Claim Three: The Alameda Blowout is a directional sniper
SBF first stressed that it had not managed the trading firm Alameda in the past few years, and then reviewed the entire thunderstorm.
Heading into 2022, Alameda has a net worth of $100 billion, $8 billion in liabilities and "billions of dollars" of liquidity. Of course, the trading company also has a long-standing problem of not having "fully hedged" the assets on hand.
SBF emphasized that with the 2022 cryptocurrency shock, Alameda finally hedged "enough" before the summer, and in addition to Bitcoin and Ethereum, QQQ (Nasdaq 100 Index ETF) also became the main hedge. But unlike what triggered the collapse of other trading firms or exchanges, FTX's thunderstorm itself was not a mere market fluctuation.
SBF accused CZ (the founder of Binance) of finally sending out that deadly tweet after months of effective PR campaigns against FTX. The November attack was entirely aimed at Alameda's holdings, and while the company's assets quickly shrank by 50%, bitcoin fell nearly 15%, while QQQ was largely unvolatile. By Nov. 10, Alameda's balance sheet had fallen to nearly $8 billion, while $8 billion in liabilities had not changed, but not all of those assets would be immediately realizable.
(Description of asset fluctuations, source: SBF self-made)
Since Alameda's leveraged position was opened at FTX International, the exchange's liquidity was also dragged down, and eventually the lack of liquidity in the run wave eventually became insolvent.
So SBF concluded that Alameda's problem was that it failed to adequately hedge against market crashes, as a series of companies such as Three Arrows Capital did before, and FTX exchanges were affected by it, so there was no theft of user assets at all.