One FTX executive vomited when he learned that the crypto exchange was missing billions of dollars of customer money. A company lawyer quit via a harsh text message to then-chief executive Sam Bankman-Fried. A top salesman who had bet big on FTX equity saw most of his wealth evaporate overnight.
What started as a dream job turned into a nightmare for employees of FTX, the crypto exchange that imploded in spectacular fashion last week. The Wall Street Journal spoke to more than a dozen current and former employees, many of whom said they were stunned by FTX’s swift demise and shocked by the alleged misuse of customer funds.
For its roughly 300 staffers, FTX seemed like an opportunity to reap financial rewards at one of the world’s fastest-growing cryptocurrency firms while fulfilling a sense of moral mission. 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 on 11 November, just four days after Bankman-Fried tweeted that FTX was “fine” despite a flood of customer withdrawals. He now faces questions about why FTX lent some $10bn in customer funds to an affiliated trading firm, Alameda Research.
The crypto exchange said in a bankruptcy-court filing 15 November that its collapse had drawn “substantial interest” from regulators and that it had been contacted by the US’s Justice Department, the Securities and Exchange Commission and dozens of other agencies during the previous 72 hours.
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 Bankman-Fried, Salame wasn’t part of the inner circle around FTX’s leader, the people said.
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Employees complained that they were learning about the rapidly evolving situation from Twitter and the media rather than from their own management.
“I have very limited transparency and more is not possible without full cooperation from the founders,” Ryne Miller, general counsel of FTX’s US arm, said in a message to staff posted on a company-wide Slack channel, a copy of which was seen by the Journal.
“I don’t see anyone’s reasonable questions being answered. Out of respect to all the employees of this company, I think we deserve better given the circumstances,” one junior US-based employee said in another message on the same Slack channel that was viewed by the Journal.
Bankman-Fried later apologised to employees in a late-night Slack message. “I completely understand that this is a tough time for all of you,” he wrote.
In an email 15 November, Bankman-Fried told the Journal: “During the crash, many of my internal communications were being leaked onto Twitter, making it difficult for me to address the whole company with information that wasn’t yet ready for the public.”
By then, many staffers were gone. 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, people familiar with the matter said. One employee said he submitted his resignation to his boss, only for the boss to say he had already resigned himself.
A friend of Friedberg’s who had dinner with him the day he quit said the attorney — previously a big admirer of Bankman-Fried — was visibly shaken.
Friedberg showed this friend the text message he sent to Bankman-Fried and other top FTX executives submitting his resignation. In the message, the friend recalled, Friedberg described himself as devastated and said: “One day I hope I can forgive you.”
The implosion of FTX was financially ruinous for some employees. Outside the US, 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.
“You have to understand just how devastated the average FTX employee was,” said Nathaniel Whittemore, a former FTX marketing specialist who quit last week. “Not only did it seem they might be out of [a] job, but they also were potentially facing the total loss of their savings. All I could think of was rage and white-hot anger.”
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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, 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.
Tackett — who continued to tweet updates to FTX customers last week even after quitting his sales job — said he had lost 80% of his net worth in the collapse. “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 Bankman-Fried in frantic attempts to secure funds to repay users, employees said.
FTX relocated to the Bahamas from Hong Kong last year and created a cushy lifestyle for employees. The company spent more than $100,000 every 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, largely for logistics, compliance and partnership roles. Excited to be part of what seemed like a promising new industry in their island country, some local hires spent thousands of dollars to buy FTX equity earlier this year, they said.
As FTX disintegrated last week, many of the expatriate employees 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 declined.
— Angel Au-Yeung and Dave Michaels contributed to this article.
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This article was published by the Wall Street Journal, a fellow Dow Jones Group brand