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A timeline of the historic collapse of cryptocurrency exchange FTX
Sam Bankman Fried, the former CEO of FTX, was a thirty-year-old cryptocurrency wunderkind who for years earned good will as a philanthropist and leading advocate for industry regulation. Now, his former company is bankrupt and he was condemned to defraud investors of billions of dollars.
A federal judge sentenced Bankman-Fried to 25 years in prison on Thursday.
Some cryptocurrency traders, who have deposited their savings on the platform, may never get their money back.
Below is a timeline of the series of events that explains exactly how the company and its founder fell so far, so fast.
2024
January 31st – An attorney representing FTX’s bankruptcy estate said the firm expects to repay clients in full. “There is still a great deal of work and risk between us and this outcome, but we believe the goal is within reach and we have a strategy to get there,” FTX lawyer Andrew Dietderich said in an email. court hearing.
February 27 – Bankman-Fried’s lawyers submitted a memorandum saying she should receive a prison sentence of between 5.25 and 6.5 years.
March 15 – Prosecutors said Bankman-Fried should receive 40 to 50 years in prison because of the “enormous scale of the fraud.”
March 28 – A federal judge sentenced Bankman-Fried to 25 years in prison. “This was a very serious crime,” said U.S. District Judge Lewis Kaplan.
2023
January 3 – In a New York courtroom, Bankman-Fried he begged not guilty of criminal charges for defrauding investors. U.S. District Judge Lewis Kaplan announced the trial will take place in October.
January 12th – Bankman-Fried published a 2,300-word blog post rebuking allegations of fraud and conspiracy, filled with charts and graphs. He said he did not steal customer funds, but attributed the company’s problems to a sharp downturn in the cryptocurrency market.
August 11th – Bankman-Fried got his bail revoked and was immediately turned over to the custody of the US Marshals. Bankman-Fried had tampered with witnesses, prosecutors said, citing his decision to share Caroline Ellison’s personal writings with the New York Times. Subsequently, Bankman-Fried was housed at the Metropolitan Detention Center in Brooklyn while awaiting trial.
October 3 – Proceedings in the Bankman-Fried trial have begun. Over the next few weeks, Ellison would do just that become one of the prosecution’s star witnesses, saying Bankman-Fried didn’t think the rules applied to him. Bankman-Fried testified in his defense during three days of hearings.
November 2 – A jury found Bankman-Fried guilty on all charges in his federal fraud and conspiracy trial. Overall, the charges carry a maximum sentence of 110 years in prison.
2022
November 2 – FTX’s collapse is partly due to the cryptocurrency exchange’s close relationship with Alameda Research, a cryptocurrency hedge fund also founded by Bankman-Fried.
The major concerns about FTX began when the news broke CoinDesk published an article noting that a significant portion of Alameda Research’s assets are made up of FTT, a token created by FTX that allows users of the exchange to access discounted trading fees.
Because FTT cannot be easily exchanged for cash, the report fueled concerns about the capital reserves of Alameda Research and thus FTX.
November 6 – In response to the article, Changpeng Zhao, CEO of rival cryptocurrency exchange Binance, often referred to as “CZ,” said he would sell all of the company’s holdings in FTT, worth $580 million worth of tokens.
The exit of a cryptocurrency giant triggered a broader sell-off, similar to a bank run, putting enormous pressure on FTX to meet the sudden demand for customer withdrawals. Due to a lack of funds, FTX has stopped customer withdrawals altogether.
November 8 – FTX has reached a deal to sell itself to Binance, the cryptocurrency exchange whose executive helped trigger the sell-off.
“This is a user-centric development that benefits the entire industry,” Bankman-Fried She said. “CZ has done, and will continue to do, incredible work to build the global crypto ecosystem and create a freer economic world.”
“The important thing is that customers are protected,” he said added.
November 9 – Binance pulled out of the deal to acquire FTX.
“As a result of corporate due diligence, as well as breaking news regarding mismanaged client funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com.” Binance She said.
Binance’s Zhao summed up the decision in a tweet:
Meanwhile, the Securities and Exchange Commission and the Department of Justice had begun investigating the collapse of FTX Wall Street Journal relationships.
Sequoia Capital, a leading venture capital firm, reduced its approximately $210 million stake in FTX to $0.
“Our business is risk taking,” Sequoia Capital She said in a public letter. “Some investments will surprise on the upside, others on the downside.”
November 10th – A financial regulator in the Bahamas has frozen FTX’s assets.
The Securities Commission of the Bahamas She said was aware of public statements suggesting that FTX client funds were potentially “mismanaged” and “mismanaged.”
In this May 11, 2021, file photo, Sam Bankman-Fried, co-founder and CEO of FTX, is shown in Hong Kong. Bloomberg via Getty Images, FILE
11 November – FTX has filed for Chapter 11 bankruptcy protection as it evaluates the value of its remaining assets, a company announcement said.
Bankman-Fried stepped down as CEO and was replaced by John J. Ray III, who led disgraced energy company Enron through bankruptcy proceedings in the 2000s.
“Immediate Chapter 11 relief is appropriate to provide FTX Group the opportunity to evaluate its situation and develop a process to maximize recoveries for affected parties,” Ray said.
November 12 – The Wall Street Journal reported that FTX lent customer deposits to Alameda Research to help it meet its liabilities, and senior executives at Alameda Research were aware of this, raising further scrutiny of the relationship between Alameda Research and FTX.
November 14th – The collapse of cryptocurrency exchange FTX has been the subject of an investigation by federal prosecutors in New York, sources familiar with the matter told ABC News.
The question, the sources say, is whether FTX violated securities laws when it reportedly gave client funds to Alameda Research.
November 16 – House lawmakers invited Bankman-Fried and Alameda and Binance executives to testify at a Capitol Hill hearing in December.
“The fall of FTX caused enormous damage to over a million users, many of whom were ordinary people who invested their hard-earned money in the FTX cryptocurrency exchange, only to see it all disappear in a matter of seconds,” he said Representative Maxine. Waters, D-California, said in a statement.
“Unfortunately, this event is just one of many examples of cryptocurrency platforms that have collapsed just in the past year.”
Meanwhile, celebrity supporters of FTX – including Naomi Osaka, Shaquille O’Neal and Kevin O’Leary – are being sued in federal court in a class action lawsuit alleging that misrepresentations of a deceptive product have been used to deceive vulnerable investors.
“I didn’t know, nor did any of the other celebrities, what happened here,” O’Leary, an entrepreneur and panelist on the TV show “Shark Tank,” told ABC’s “Nightline.”
Later in the day, Vox published an interview in which Bankman-Fried disparages regulators using an expletive, confesses that his previous calls for tighter crypto regulation had been driven by public relations concerns, and says he regrets that the company filed for bankruptcy.
Bankman-Fried, a prolific philanthropist, described his public commitment to ethics in the interview as “a stupid game that Westerners play.”
November 17 – John Ray, the incoming CEO tasked with guiding the company through bankruptcy proceedings, said in a filing in court that he had never seen such a “total failure” of corporate controls in his career, not even during the Enron scandal.
“From compromised systems integrity and faulty regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals,” Ray said.
“This situation is unprecedented,” he added.
December 12th – Bankman-Fried was arrested in the Bahamas after federal prosecutors in New York filed criminal charges contained in a sealed indictment, according to the Royal Bahamas Police Force.
A source familiar with the allegations told ABC News that Bankman-Fried is facing a multi-count fraud charge a month after FTX filed for $32 billion in bankruptcy.
The arrest “followed the receipt of formal notification from the United States that it has filed criminal charges against SBF and will likely request his extradition,” the Bahamas attorney general’s office said.
December 13th – The US Securities and Exchange Commission accused Bankman-Fried of defrauding investors.
“The collapse of FTX highlights the real risks that unregistered cryptocurrency trading platforms can pose to both investors and customers,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a statement.
ABC News’ Aaron Katersky, Meredith Deliso, Mark Osborne, Mark Gaurino and Melissa Gaffney contributed to this report.