From behind bars, convicted FTX founder Sam Bankman-Fried (SBF) has released a 15-page report dated September 30, challenging the fundamental narrative of FTX's collapse in November 2022. SBF contends that the cryptocurrency exchange was never truly insolvent but rather experienced a severe “liquidity crisis” triggered by a rapid $5 billion in customer withdrawals over just two days. He asserts that FTX and its trading arm, Alameda Research, collectively held approximately $25 billion in assets and $16 billion in equity value against about $13 billion in liabilities, implying that customers could have been fully repaid if the company had been permitted to continue operations.
“FTX always had sufficient assets to repay all customers, in kind, and provide significant value to equity holders as well. That is what would have happened if lawyers hadn’t taken over FTX,” Bankman-Fried wrote.
SBF places the blame squarely on outside counsel and new CEO John J. Ray III, arguing their intervention pushed FTX into Chapter 11 bankruptcy prematurely, derailing potential rescue financing. By reframing the issue as a liquidity problem rather than outright insolvency, Bankman-Fried aims to soften fraud allegations and deflect blame onto the legal team responsible for freezing operations.
The Flawed Logic of 'Solvency by Bull Market'
A core element of Bankman-Fried’s report relies on a concept critics dub “solvency by bull market.” He retroactively re-prices FTX’s frozen portfolio – including assets like Solana, Robinhood, Sui, Anthropic, and even the now-defunct FTT token – at current or projected future values. He suggests that by the end of 2025, this basket could be worth an astounding $136 billion, easily covering the $25 billion in customer and creditor claims he acknowledges.
However, this reasoning fundamentally clashes with bankruptcy law. Once Chapter 11 is filed, claims are frozen at the petition date and converted to dollars; a bankrupt company is not permitted to continue trading and speculate on future market recoveries to repair its balance sheet. Ryne Miller, FTX's former general counsel, directly refutes SBF's claims:
“That week in November 2022, assets on hand were nothing near adequate, and the founders were fabricating asset lists (and desperately chasing new investors). The coins were gone, folks. Your coins were gone. That’s why bankruptcy happened.”
Crucially, much of FTX’s portfolio was built using commingled customer funds. No court would have allowed these assets to remain at risk, exposed to market volatility, while management gambled on a rebound. Bankman-Fried’s calculations assume a fantastical scenario where regulators and creditors would have allowed an exchange under severe criminal and liquidity stress to operate normally for two more years.
The FTX Reboot That Never Was
SBF also maintains that FTX was “shut down too early,” claiming it was still generating roughly $3 million daily, equating to nearly $1 billion annually, when Ray halted operations. He also alleges that management had secured $6 billion to $8 billion in emergency financing, which could have closed the deficit by November 2022. This argument hinges on the assumption that FTX could have continued as a going concern, maintaining customer trust and avoiding fire-sale discounts on its venture portfolio.
Yet, by mid-November 2022, FTX faced an irreversible collapse of confidence. Counterparties were abandoning ship, licenses were suspended, and law enforcement agencies were closing in. Under these conditions, continuing operations would have risked deeper losses and severe regulatory backlash. Industry experts and the bankruptcy estate argue that freezing accounts and pursuing an orderly asset recovery under court supervision was the only viable and responsible path.
In fact, Miller suggests that the bankruptcy estate's disciplined management of assets like FTX’s significant Solana and Anthropic stakes, which have appreciated sharply since 2022, is precisely why creditors are now likely to be made whole. This contradicts SBF’s portrayal of a profitable firm unfairly shuttered, highlighting that his assumptions about ongoing revenue and investor confidence existed in a reality that had already vanished.
Competing Timelines, Competing Truths
The core dispute boils down to which timeline defines FTX's reality. Bankman-Fried measures solvency by hypothetical 2025 asset prices and a business that hypothetically never closed. The bankruptcy estate, however, bases its assessment on the assets and liabilities present in November 2022. On the estate’s timeline, FTX faced an undeniable $8 billion hole, with many assets being illiquid or overstated. Freezing operations and converting claims to dollars were the only fair and legal course of action.
Conversely, SBF's timeline casts the intervention itself as the damage, alleging lawyers “commandeered” the company, “destroyed” over $120 billion in hypothetical future value, and incurred nearly $1 billion in fees. This inversion attempts to reframe a standard, court-supervised wind-down as a hostile takeover that vaporized potential future wealth. However, the indisputable central fact remains: when customers demanded their funds, FTX could not pay. As blockchain investigator ZachXBT summarized:
“SBF is just trying to weaponize the fact that every FTX asset / investment has gone up from picobottom Nov 2022 prices when they factually could not pay out users at the time of bankruptcy and instead point the bankruptcy team as the true villain.”
Source: CryptoSlate
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