Sam Bankman-Fried, former CEO of the erstwhile global leading cryptocurrency exchange platform, FTX, has been on the news after reports of the bankruptcy of FTX. As at July 2021, FTX was reportedly valued at $18billion with more than one million subscriptions recorded on the platform. This pushed FTX forward as the third largest crypto exchange platform. By January 2022, FTX reported its valuation at $32billion.
However, in November 2022, FTX filed for bankruptcy after a lingered reported liquidity crisis since July. SBF who has been held responsible for FTX’s failure on allegations of “diverting billions of dollars of FTX’s customer funds for his own personal benefit and to help grow his crypto empire” was then “charged for fraud by the Securities and Exchange Commission” following his arrest on Monday.
A document prepared by Bankman-Fried toward his hearing on Tuesday highlighted markers of hubris responsible for Fried’s personal failings and consequently the fall of FTX. Hubris as a concept and how it manifests in corporate leadership and causes organisational failure has been extensively explained in another article here.
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According to Business Insider, the 7000-word draft Bankman-Fried wrote explained he was less grounded in operational details in the months leading up to his exchange’s downfall. Some of SBF’s claims in the draft that were quoted by insider include the following:
‘’I had prided myself on staying grounded: staying in the weeds, day to day, of the company.
‘’I also prided myself on having a strong work ethic: I began FTX routinely working 18 hours per day. But for much of 2022, I believe that I was working about 30 percent less than I used to. And even when I was working, I was less focused and disciplined than I used to be.
‘’That’s time that wasn’t spent focusing on the actual core product, including risk management.
‘’I made a number of significant mistakes.
‘’I thought that I could hold FTX together despite the expansion. But I was wrong. I bit more than I could chew, and ended up failing to focus on risk management’’.
Meanwhile the FTX’s new CEO John J. Ray, had described the FTX decline as self-inflicted using the word ‘’catastrophic failure’’. According to a news report on the Corporate Governance Institute’s blog, Mr Ray who has a track record of managing bankruptcies in multiple companies attributed FTX failure to a number of factors which include the following:
- compromised systems integrity
- faulty regulatory oversight
- lack of centralised control of the cash that it handled
- inaccurate list of bank accounts and account signatories
- inaccurate bookkeeping
- luxury purchases made by employees in the Bahamas with cooperate funds
- inaccurate registering of assets with government authorities.
Ray also stated that despite the vast wealth and the popularity of FTX, control was in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals. ‘’Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here’’ Mr Ray had said.