FTX Never Insolvent: Bankman-Fried Blames Chapter 11 Lawyers
Sam Bankman-Fried says FTX was never insolvent and only faced a liquidity crisis. In a 15-page court filing, he claims FTX had $25 billion in assets and $16 billion in equity, enough to cover the $8 billion withdrawal surge. He accuses bankruptcy lawyers and CEO John J. Ray III of misrepresenting FTX finances to force Chapter 11, selling $7 billion in FTT tokens and assets below market value. Critics point to court records and forensic audits showing Alameda Research used a secret backdoor to borrow unlimited customer funds, inflating its balance sheet with FTT and causing an $8 billion shortfall. That gap triggered a liquidity crisis that wiped out $200 billion in crypto market value. Bankman-Fried, convicted of fraud and conspiracy in November 2023, is serving a 25-year sentence and is appealing. Market reaction remains muted, as traders weigh court findings against Bankman-Fried’s claims.
Neutral
Bankman-Fried’s claim that FTX was never insolvent may shape legal debates but adds little new data for traders. The market has already priced in insolvency risks and litigation. Court records reaffirm the liquidity shortfall caused by Alameda’s backdoor borrowing. As a result, traders are unlikely to adjust positions based solely on this filing, keeping short-term price movements muted. Long-term prospects hinge on appeals and potential fund recoveries, but current sentiment remains cautious.