When FTX, the crypto exchange, imploded last week, it came as a shock to many of its employees. According to The Wall Street Journal, which spoke to more than a dozen current and former employees, many of them were stunned by the company's swift demise and alleged misuse of customer funds.
For its roughly 300 staffers, FTX seemed like an opportunity to reap financial rewards at a cutting-edge cryptocurrency firm while fulfilling a sense of moral mission. Mr. Bankman-Fried pledged to give 1% of the exchange’s fee revenue to charity, and he appeared to be a paragon of ethics in an industry plagued by scams.
Then it collapsed with lightning speed. Bahamas-based FTX filed for bankruptcy Friday, just four days after Mr. Bankman-Fried tweeted that FTX was "fine" despite a flood of customer withdrawals. He now faces questions about why FTX lent some $10 billion in customer funds to an affiliated trading firm, Alameda Research.
The crypto exchange said in a bankruptcy-court filing Tuesday that its collapse had drawn the attention of numerous regulators, including the Justice Department and the Securities and Exchange Commission. In the 72 hours since the filing, the exchange has been contacted by dozens of other agencies.
Ryan Salame, co-chief executive of the exchange’s Bahamas-based unit FTX Digital Markets, told people close to him that he became physically sick and threw up when he became aware of FTX’s problems early last week, the people said. Although he worked closely with Mr. Bankman-Fried, Mr. Salame wasn’t part of the inner circle around FTX’s leader, the people said.
Employees have complained that they are learning about the rapidly evolving situation from Twitter and the media, rather than from their own management. In a message to staff posted on a companywide Slack channel, Ryne Miller, general counsel of FTX's U.S. arm, said that more transparency is not possible without full cooperation from the founders.
One junior U.S.-based employee said in a message on a Slack channel that was viewed by the Journal that they don't see anyone's reasonable questions being answered. They said that, out of respect to all the employees of this company, they think they deserve better given the circumstances.
Mr. Bankman-Fried later apologized to employees in a late-night Slack message. "I completely understand that this is a tough time for all of you," he wrote. "I'm sorry for my part in adding to the stress and anxiety you're all feeling."
In an email to the Journal on Tuesday, Mr. Bankman-Fried said that during the crash, many of his internal communications were being leaked onto Twitter, making it difficult for him to address the whole company with information that wasn’t yet ready for the public.
By then, many staffers had already left. According to people familiar with the matter, dozens of FTX employees quit last week, including senior figures such as head of product Ramnik Arora, chief regulatory officer Dan Friedberg, and head of institutional sales Zane Tackett. One employee said he submitted his resignation to his boss, only to be told that his boss had already resigned.
The attorney's friend who had dinner with him the day he quit said the attorney was visibly shaken. The attorney was previously a big admirer of Mr. Bankman-Fried.
Mr. Friedberg showed a friend the text message he sent to Mr. Bankman-Fried and other top FTX executives submitting his resignation. In the message, the friend recalled, Mr. Friedberg described himself as devastated and said: “One day I hope I can forgive you.”
The collapse of FTX was financially devastating for some employees. Outside the U.S., many staff were paid via direct deposit to their accounts on the cryptocurrency exchange, so when FTX froze customer withdrawals last week, these employees couldn’t access their funds, people familiar with the matter said.
Nathaniel Whittemore, a former FTX marketing specialist who quit last week, said that the average FTX employee was devastated by the situation. "Not only did it seem they might be out of job, but they also were potentially facing the total loss of their savings. All I could think of was rage and white-hot anger."
It was also common for employees to hold FTX equity or get part of their pay in the exchange’s FTT tokens, the people said. Last fall, Mr. Bankman-Fried offered employees the opportunity to buy shares in FTX at a 50% discount to what venture capitalists had paid in a recent funding round, the people said. Now that equity is worthless and the price of FTT has crashed 90% since the start of November, many employees are facing financial hardship.
Mr. Tackett said last week that he had lost 80% of his net worth in the collapse of FTX. "I kept nearly all my money on FTX," he told the Journal.
By this past weekend, only a skeleton crew remained at FTX's Bahamas headquarters, helping Mr. Bankman-Fried in frantic attempts to secure funds to repay users, employees said. The situation was exacerbated by the fact that many of the company's employees had already left for the holidays.
FTX relocated to the Bahamas from Hong Kong last year, creating a luxurious lifestyle for employees. The company spent over $100,000 per week on catering for its headquarters, as well as millions of dollars on housing for executives in exclusive beachside developments, according to former employees. It provided fleets of cars—including BMWs, Toyotas and Hondas—for employee use.
FTX also hired dozens of Bahamian citizens for various roles, including logistics, compliance and partnerships. Some of these local hires were excited about the prospect of a new industry in their island country and spent thousands of dollars to buy FTX equity earlier this year.
As FTX fell apart last week, many of the employees who had been living abroad said they left the island for Hong Kong or New York. Those who left earlier were able to book flights on their FTX credit cards. Those who waited longer said they found their credit cards were declined.
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