New prison report flouts claim FTX could have repaid customers from $25B in assets

Sam Bankman-Fried is once more difficult the core narrative of his downfall: that FTX was bancrupt when it collapsed in November 2022.

In a 15-page report written from prison and dated Sept. 30, the convicted founder claimed the trade “was by no means bancrupt” however merely trapped in a “liquidity disaster” after customers pulled $5 billion in two days.

He argued that FTX and its buying and selling arm, Alameda Research, collectively held $25 billion in assets and $16 billion in fairness worth towards about $13 billion in liabilities. According to him, his corporations had sufficient to repay customers in full if the corporate had been allowed to proceed working.

He wrote:

“FTX all the time had adequate assets to repay all customers, in form, and supply important worth to fairness holders as effectively. That is what would have occurred if attorneys hadn’t taken over FTX.”

Instead, Bankman-Fried blames exterior counsel and new CEO John J. Ray III for pushing FTX into Chapter 11 earlier than rescue financing could be accomplished.

His framing of FTX’s subject as a liquidity downside, slightly than insolvency, serves to melt allegations of fraud and redirects blame toward the legal team that froze operations.

If accepted, it transforms the implosion from one among misused deposits right into a fixable financial institution run lower brief by overzealous attorneys.

Solvency by hindsight

In his report, Bankman-Fried treats FTX’s frozen portfolio as if it had survived intact by the complete 2023–25 market restoration.

He reprices the bankrupt agency’s holdings in Solana, Robinhood, Sui, Anthropic, and even the now-worthless FTT token at present values, suggesting that by the tip of this 12 months, the basket can be price roughly $136 billion. This would simply cowl the $25 billion he cites in buyer and creditor claims.

From there, he insists, everybody could have been paid “in full, in form,” and fairness buyers would nonetheless have walked away with billions.

However, that reasoning is flawed as it’s “solvency by bull market.”

Bankruptcy regulation doesn’t permit a failed firm to maintain buying and selling for years in the hope that rising costs will restore its steadiness sheet. Once Chapter 11 is filed, claims are frozen on the petition date, transformed to {dollars}, and pursued by restoration, not hypothesis.

As former FTX common counsel Ryne Miller pointed out:

“That week in November 2022, assets readily available had been nothing close to enough, and the founders had been fabricating asset lists (and desperately chasing new buyers). The cash had been gone, of us. Your cash had been gone. That’s why chapter occurred.”

This implies that a lot of FTX’s portfolio was constructed with commingled buyer funds. No courtroom would have permitted these assets to stay in danger whereas administration gambled on a rebound.

Bankman-Fried’s math solely works if regulators and collectors had let an trade beneath legal and liquidity stress maintain working usually for 2 extra years, a state of affairs that borders on fantasy.

The FTX reboot that by no means occurred

The similar optimism underlies his claim that FTX was “shut down too early.”

Bankman-Fried insists the trade was nonetheless incomes about $3 million a day and practically $1 billion a 12 months when Ray halted operations. He additionally maintains that administration had recognized $6 billion to $8 billion in emergency financing that could have closed the outlet “by the tip of November 2022.”

That line of argument assumes FTX remained a going concern, that buying and selling would have continued, customers would have stayed, and the enterprise portfolio could have averted fire-sale reductions.

But by mid-November, the trade confronted a whole collapse of confidence. Counterparties had been fleeing, licenses were suspended, and regulation enforcement companies had been circling. Under these circumstances, preserving FTX reside would have risked deeper losses and regulatory backlash.

However, business consultants famous that the chapter property selected the safer route of freezing accounts, preserving what remained, and pursuing orderly asset restoration beneath courtroom supervision.

In truth, Miller recommended that the chapter property’s resolution helped salvage some worth, slightly than destroying it.

According to him, the property’s disciplined administration of FTX’s Solana and Anthropic stakes, each of which appreciated sharply in the restoration,  grew to become one of many principal causes collectors might now be made entire.

This implies that Bankman-Fried’s portrait of a worthwhile agency unfairly shuttered by attorneys overlooks these realities. His assumptions about ongoing income and investor confidence belong to a world that now not exists as soon as belief evaporates.

Competing timelines, competing truths

At its core, the dispute facilities on which timeline defines the corporate’s actuality.

Bankman-Fried measures solvency by 2025 asset costs and a enterprise that by no means closed. The chapter property measures it by what remained in November 2022.

On the property’s timeline, FTX confronted an $8 billion gap, assets had been illiquid or overstated, and contemporary funding efforts had stalled. Freezing operations and changing claims to {dollars} had been the one truthful course.

On Bankman-Fried’s timeline, the act of intervention brought about the harm as attorneys “commandeered” the corporate, bought assets right into a rising market, incurred practically $1 billion in charges, and “destroyed” over $120 billion in hypothetical upside.

That inversion turns the cleanup into the offender. It reframes a typical court-supervised wind-down as a hostile takeover that allegedly vaporized future worth.

Yet the central truth stays unchanged: when customers demanded their cash, FTX was unable to pay. Everything else is retroactive storytelling.

As blockchain investigator ZachXBT frames it:

“SBF is simply making an attempt to weaponize the truth that each FTX asset / funding has gone up from picobottom Nov 2022 costs once they factually could not pay out customers on the time of chapter and as a substitute level the chapter staff because the true villain.”

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