FTX founder blames ‘poor labeling’ of bank accounts for cryptocurrency crash

The entrepreneur behind the cryptocurrency exchange teetering on the brink of collapse he admitted he “screwed up” as he blamed internal errors for the explosion that triggered the broader market crash.

In a lengthy Twitter thread posted on Thursday, Mr Bankman-Fried repeatedly apologized to FTX users while blaming the exchange’s woes on his own misreading of its management accounts.

“Poor internal labeling of accounts linked to bank accounts meant I was quite off the mark on my sense of user margin,” he wrote.

“I am… and I should be better.”

Until earlier this week, FTX was one of the top five cryptocurrency exchanges in the world, trading billions of dollars daily. However, rumors about the company’s financial situation led to a stampede of withdrawals earlier this week, triggering a liquidity crisis and forcing FTX to ask for a bailout. Mr Bankman-Fried said yesterday that clients tried to withdraw $5 billion from FTX on Sunday alone.

Rescue talks with rival Binance ended on Wednesday night and Mr Bankman-Fried is now looking elsewhere for funding. He told investors on the call that he would be “incredibly, incredibly grateful” if they could help, according to Bloomberg.

“We are currently going through the week doing everything we can to increase liquidity,” he tweeted last night. “I can’t make any promises about that. But I’ll try. And I’ll give everything I have to if it helps.”

Mr Bankman-Fried said talks were taking place with “a number of players”.

However, in a sign of poor prospects for the company, venture capital backer Sequoia Capital said it had written off its investment in FTX.

Sequoia, one of Silicon Valley’s major corporate investors, published an extensive profile of Mr Bankman-Fried in September, claiming he played a video game during a key meeting in which he was pitching for money. The 30-year-old tech entrepreneur played League of Legends on his phone during a pitch meeting where he secured $900 million in funding, according to a blog post.

“I was sitting ten feet away from him and I walked by and thought, Oh, s–t, that was really good,” Sequoia product manager Ramnik Arora wrote of his meeting with Mr. Bankman-Fried. “And it turns out this f—r was playing League of Legends the entire meeting.”

League of Legends is an online multiplayer game known for demanding a lot of attention from its players.

Sequoia General Partner Michelle Bailhe added, “We were incredibly excited.”

Mr Bankman-Fried previously said he was “notorious for playing League of Legends while on the phone”.

FTX, which was valued at $32 billion back in September, takes money from the real world and exchanges it for digital “currency” tokens like Bitcoin and Ethereum. Its platform allows customers to store and trade cryptocurrencies.

Before the liquidity crunch, FTX lent $4 billion to Mr. Bankman-Fried’s other crypto firm, Alameda Research, according to Reuters. It claimed some of this involved client funds. Alameda trades cryptocurrencies on its own book and was in the process of closing on Thursday, Mr. Bankman-Fried said.

The liquidity crunch at FTX and Alameda, the companies founded by Mr Bankman-Fried, sent shockwaves through the volatile cryptocurrency sector. Bitcoin is down 18 percent since Monday, broadly in line with the rest of the market.

JP Morgan has warned that Bitcoin could lose 80 percent of its value amid a “cascade of margin calls” following the outbreak of the crisis. Wall Street bank analysts said the world’s largest cryptocurrency could fall to $13,000 – 80% drop from its peak above $68.000 reached one year ago.

Sequoia and FTX did not respond to requests for comment.