FTX Exchange and Sam Bankman-Fried: Background and Timeline of the Events

The FTX crash and fraud charges against Sam Bankman-Fried (also known as SBF) are the grandest headline-generating recent events in the crypto world.

How did it all start, who is really SBF, and why has the situation reached this point? In this article, we cover the key events of the FTX saga.

Origins of FTX and Alameda Research.

In Sep 2017, SBF and Tara Mac Aulay establish Alameda Research, an unassuming crypto trading firm. In May 2019, SBF spins a new entity out of Alameda Research. The new firm is called FTX. FTX operates as a derivatives crypto exchange.

FTX Growth to Prominence.

Over the following 3.5 years, FTX grows into a leading crypto exchange. In July 2021, it becomes the 3rd largest crypto exchange in the world, behind only the leading duo – Binance and Coinbase.

Soon after establishing FTX, SBF launches the exchange’s own crypto token – FTT. It wasn’t among the most usual moves, as crypto exchanges don’t really require a cryptocurrency of their own to operate.

During the FTX heydays, SBF quietly used FTX customer funds for high-risk trading via Alameda Research. The FTT crypto was often used as collateral in these trades.

SBF also issued himself loans (of up to $1 billion) via a network of companies linked to Alameda Research.

Headquartered in the Bahamas and enjoying the unregulated nature of the crypto market and trading, SBF engaged in extremely risky or outright fraudulent business operations, while enjoying the shiny image of the boss of a leading crypto exchange.

And then it all came crashing down!

The Timeline of the Key Events:

  • FTX Event 1 (Sep 2022): Bloomberg reports on a bit too close a working relationship between FTX and Alameda.
  • FTX Event 2 (Nov 2, 2022): CoinDesk reports that the bulk of Alameda’s assets are held in FTT tokens.
  • FTX Event 3 (Nov 6, 2022): Binance Exchange, which holds a significant amount of FTT tokens from an earlier deal with FTX, announces its intent to sell its FTT holdings. Binance’s CEO, Changpeng Zhao, specifically refers to the CoinDesk report as the cause of the intended selloff.
  • FTX Event 4 (Nov 6-7, 2022): Following the Binance selloff announcement, the price of FTT starts to nosedive, causing widespread worry about FTX’s position in general.
  • FTX Event 5 (Nov 8, 2022): SBF and Zhao reach an agreement for Binance to bail out FTX. The agreement is non-binding. The same day, FTX halts crypto withdrawals. The panic wave is growing.
  • FTX Event 6 (Nov 9, 2022): After completing their “corporate due diligence”, Binance walks away from the bail-out deal – FTX is now well and truly sinking.
  • FTX Event 7 (Nov 10, 2022): FTX and Alameda Research file for Chapter 11 bankruptcy. The chapter 11 bankruptcy lets companies restructure their debts rather than liquidate their assets.
  • FTX Event 8 (Nov 14, 2022): Financial Times publishes FTX’s balance sheet, showing $9 billion in liabilities vs just $900 million in assets.
  • FTX Event 9 (Dec 12, 2022): After weeks of deliberations between the US and Bahamian authorities, SBF is arrested in the Bahamas.
  • FTX Event 10 (Dec 22, 2022): SBF is extradited to the US, handcuffed but defiant. Upon arrival and a brief court appearance, he’s released on bail of $250 million.
  • FTX Event 11 (Jan 3, 2023): SBF pleads not guilty to charges of defrauding FTX customers and investors.
  • FTX Event 12 (Jan 11, 2023): FTX administrators report that $5 billion of the company’s funds have been recovered, raising the hopes of customers and creditors that some of their lost funds might be finally repaid.

There are grave doubts, however, that the affected parties (customers, investors, creditors) are ever going to be repaid any substantial fraction of the losses suffered. The FTX saga is a continuing event. All eyes are now on what the administrators can dig up!