Eight criminal charges have been filed against FTX founder Sam Bankman Fried, ranging in severity from fraud to conspiracy for money laundering. These allegations relate to the collapse of the once-dominant exchange. Earlier this week, he pleaded not guilty on all charges and got a trial date of October 2—but if that’s all you know about this saga so far, you might be wondering why it matters.
The biggest event that rocked crypto markets was the collapse of FTX. Before it ceased operation and filed for bankruptcy protection, FTX had been the largest crypto market player. Second largest exchange and saw nearly $30 billion in daily volume—a fact memorialized by Bankman-Fried in a November 2021 tweet.
It was to cryptocurrencies like Bitcoin and Ethereum what the New York Stock Exchange or Nasdaq is to stocks. Now, with $8 billion missing, allegations of commingled funds with trading firm Alameda Research, and its founder out on bail, the team overseeing FTX’s restructuring says it’s spent months trying to locate all the company’s funds—and customers still have no idea if they’ll ever see their money again.
Here’s how we got here:
May 2019: FTX founded
Bankman-Fried (also known as SBF) co-founded FTX in May 2019 with Gary Wang, an ex-Google employee. The company was initially based in Hong Kong. Since 2017, Bankman-Fried has been managing Alameda Research (his trading desk).
Bankman-Fried made a name for itself as a skilled trader at Alameda, making it easy to raise funds for his new venture.
Pantera Capital, Sequoia Capital and Digital Currency Group were some of his top early stage investors. He also had the support of Consensus Labs and its venture arm Binance Labs. Bankman-Fried had raised $8 million in seed funding by August.
Fall 2020: Looking to establish a foothold
Bankman-Fried, the decentralized finance exchange SushiSwap’s alleged savior in September 2020, had been replaced by Bankman Fried.—though the details The details of how it all played out are available. put into questionGiven what we now know about SBF, it is possible to.
Nevertheless, The wave of popularity that Bankman-Fried experienced was not only a success, but FTX had to have a strong reputation by fall 2020 in order to be competitive with other centralized crypto-exchanges. At the time, FTX’s daily volume had occasionally crept above the $1 billion mark, but not very consistently.
In October 2020, the company launched “fractionalized stock trading” for Tesla, Apple, and Amazon derivatives. Then in December, the exchange launched “tokenized stocks” for five cannabis-focused companies. “To be blunt, this is one the dopest joint listings we’ve done,” Bankman-Fried wrote in a pun-filled tweet At the time.
All of 2021 – Sports marketing spending spree
FTX spent 2021 on seemingly endless deals to get its name and logo before sports fans.
That included the Formula 1’s Mercedes-AMG Petronas team, NBA’s Miami Heat Golden State Warriors, Esports Teams Furia SoloMid Team, a 10-year naming agreement for University of California-Berkeley’s stadium, Major League Baseball umpire jerseys, Monumental Sports and Entertainment’s Washington-based pro teamLeague of Legends creator Riot Games.
The marketing deals didn’t stop there. FTX also reached agreements with a handful spokespersons: Tampa Bay Buccaneers quarterback Tom Brady Supermodel Gisele Bundchen, his wife; Golden State Warriors point guard Steph Curry; top women’s tennis player Naomi OsakaLos Angeles Angels star Shohei Ohtani.
“Everyone we talk to who knows us a little bit, or a lot, or barely, or intimately, this is top of mind for them,” he would later say during The first episode Of Decrypt‘s gm podcast. “Clearly this has penetrated more than everything else we’ve done combined, in terms of people’s perception of us.”
All of those deals are now closed Call off.
July 2021: FTX buys out Binance’s shares
In a move that would prove pivotal in FTX’s undoing, the company bought out Binance’s equity shares in the company.
“We recently repurchased shares from Binance to buy them out of our cap table,” Bankman-Fried Telled Decrypt At the time. “I think it just makes sense given the role that our businesses are playing in the space. It can also give us more flexibility going forward.” It’s worth noting that Binance disputes this narrative, and CEO Changpeng Zhao, recently commenting on the deal publicly for the first time, now says it was Binance that chose to divest from FTX because of the company’s all-too-close relationship with sister firm Alameda.
FTX used $2.1 billion worth of Binance USD and—critically—FTX Token (FTT) to buy out Binance’s equity in the company. Binance had hundreds of million worth of FTT, even though FTX was in serious trouble.
June 2022: Stemming contagion
After TerraUSD, an algorithmic stabilitycoin, decimated the crypto market by removing $40 billion, the dust was just starting to settle. The U.S. dollar collapsed, sending a stablecoin intended to hold a one to one peg to zero.
Three Arrows Capital, also known as 3AC, was left insolvent by the market turmoil. As everyone soon realized, 3AC still had a significant Terra position and was borrowing heavily from major crypto lenders to fund its high-stakes investment strategies.
Bankman-Fried donned his cape and began saying in interviews, that the industry should help struggling companies after all the bankruptcy filings.
“I do feel like we have a responsibility to seriously consider stepping in, even if it is at a loss to ourselves, to stem contagion.” he said during an NPR interview. “Even though we weren’t the ones responsible for it or were not involved in it. That’s what I believe is healthy for the ecosystem and I want it to thrive.”
November 2022: A collapse
Things started to publicly fall apart for FTX in November 2022, when damning reports about Bankman-Fried’s trading desk, Alameda Research, showed that it had billions in FTT on its balance sheet against billions in liabilities.
Investors quickly realized that Alameda had no good options: If it redeemed its FTT to pay its creditors, it would tank the token’s price. If it didn’t, it would be hit with default notices for failing to repay its lenders.
CZ, Binance CEO, announced that his company would be selling its $580 million FTT stash to avoid any fallout. The company didn’t actually manage to sell many of its tokens, but the resulting panic led to billions being pulled off FTX’s exchange.
FTX had to stop withdrawals. Binance purchased FTX briefly and it entered into a non-binding deal. The deal was announced but fell apart in less than a day. Finally, Bankman-Fried resigned. FTX filed bankruptcy papers on November 11. In its bankruptcy filing, the company revealed that it owes creditors between $10 and $50 billion.
December 2022: Arrests, extradition, bail
After a frenetic media tour, during which Bankman-Fried repeatedly said he didn’t knowingly do anything wrong and did not intentionally commingle client and company funds, he was charged with eight crimes, including wire fraud and conspiracy to commit money laundering, and arrested in the Bahamas on December 12.
If you have spent more than a week in the hotel, Bahamas’ Fox Hill prisonHe was extradited and brought to the U.S. December 21. The Southern District of New York revealed that two of Bankman-Fried’s closest allies, co-founder Wang and ex-Alameda Research CEO Caroline Ellison, Had pleaded guilty They were also cooperating with authorities in building their case against Bankman Fried.
January 2023: The plea
On January 3, Bankman-Fried pleaded guilty to all charges. His trial has been set for October 2, 2012.