Sam Bankman-Fried, the imprisoned founder of the collapsed cryptocurrency exchange FTX, has claimed that his “single biggest mistake” during the company’s downfall was handing control to its new management, a decision he says cost him a final chance to save the $32 billion firm.
Bankman-Fried Reflects on FTX’s Collapse
In a recent interview with Mother Jones, Bankman-Fried said transferring control of FTX to its current chief executive, John J. Ray III, in November 2022 was the most significant misstep of his career. He argued that the move, which took place just before the company filed for bankruptcy, prevented him from securing a last-minute rescue deal.
“The single biggest mistake I made by far was handing the company over,” he said. Minutes after signing the paperwork, he reportedly received a call about a potential external investment that might have stabilised the exchange, but by then it was too late to reverse the decision.
At its peak, FTX was one of the world’s largest cryptocurrency exchanges, valued at $32 billion and seen as a cornerstone of the digital asset industry. Its sudden collapse in November 2022 triggered an $8.9 billion loss of investor funds and marked the beginning of one of the most severe downturns in crypto history.
From Founder to Felon
Bankman-Fried, widely known by his initials SBF, is currently serving a 25-year prison sentence in the United States. He was convicted on seven felony charges linked to fraud and conspiracy arising from the collapse of FTX and its sister trading firm, Alameda Research.
US prosecutors accused SBF of misappropriating billions of dollars in customer deposits to cover Alameda’s trading losses and fund risky bets, real estate purchases, and political donations. The mismanagement created what has since been called the “Alameda gap”, a multi-billion-dollar shortfall between customer funds and the firm’s obligations.
He was arrested in the Bahamas in December 2022 after US authorities filed criminal charges and was extradited to the United States in January 2023 to face trial.
Role of Sullivan & Cromwell and the New CEO
According to internal communications revealed later, Sullivan & Cromwell (S&C), the law firm that went on to represent FTX in its bankruptcy proceedings, had proposed John J. Ray III as a potential chief restructuring officer two days before the collapse. On 9 November 2022, S&C attorney Andrew Dietderich reportedly emailed Bankman-Fried, outlining plans to bring Ray on board “in a possible Chapter 11”.
After Ray assumed control on 11 November 2022, he filed for Chapter 11 bankruptcy protection within hours and began efforts to recover assets for FTX’s creditors. Ray, known for his work in high-profile corporate recoveries, later described the situation at FTX as “a complete failure of corporate controls”.
In February 2024, a group of FTX creditors sued Sullivan & Cromwell, alleging that the firm played a role in facilitating the exchange’s fraudulent activities and financially benefited from the bankruptcy process. The lawsuit sought damages for aiding and abetting fraud and breach of fiduciary duty but was voluntarily dismissed in October 2024.
By June 2024, court filings showed that S&C had earned over $171.8 million in legal fees related to the FTX bankruptcy.
FTX Creditors Still Await Billions in Repayments
Almost three years after the exchange’s implosion, FTX creditors are still waiting for full compensation. The bankruptcy estate has so far returned around $7.8 billion to users, beginning with a $1.2 billion payout in February 2024 and a $5 billion distribution in May.
In late September, FTX completed its third round of repayments worth $1.6 billion, according to Sunil, a member of the FTX Customer Ad-Hoc Committee. The estate reportedly holds as much as $16.5 billion in recovered assets, suggesting that another $8.7 billion remains to be distributed.
FTX’s restructuring team has pledged to repay at least 98 per cent of customers 118 per cent of the value of their account balances as of November 2022, effectively offering some users more than their original holdings due to asset appreciation and recovery gains.
A Cautionary Tale for the Crypto Industry
The collapse of FTX sent shockwaves across the cryptocurrency market, triggering a chain reaction of bankruptcies and forcing regulators worldwide to tighten scrutiny of digital asset platforms. Bitcoin, which traded near $69,000 a year before FTX’s fall, plunged to around $16,000 in the aftermath, deepening the industry’s prolonged bear market.
Despite ongoing recovery efforts, the FTX scandal remains a stark reminder of how rapid growth, poor governance, and lack of transparency can bring even the most celebrated startups to ruin.
While Bankman-Fried continues to defend his intentions and point to management decisions made after his departure, his conviction has cemented his place in financial history as one of the most controversial figures of the crypto era.
