The chances you haven’t at least heard of the FTX crash and the chaos that emerged in wake of the collapse surrounding its ex-CEO Sam Bankman-Fried are practically zero, but with so much coverage, and many reports just paraphrasing one another, it’s difficult to keep track of what’s actually been happening in the last month and a half.
The goal of this article is to present an easy-to-follow, fact-based timeline highlighting the most important events in the story starting with the very beginning, by briefly covering the reason for the collapse.
November 2 2022: CoinDesk Reports on Leaked Balance Sheet
It pretty much all started once Coindesk published insider information into FTXs financials, which clearly showed that:
- FTX and its sister company Alameda Research are working too closely and had access to each other’s finances.
- FTX had over $8 billion in liabilities, and its reserves were mostly in illiquid or locked assets.
- Alameda’s main reserve ($3.6 billion) were actually just FTT tokens.
This remained initially un-addressed by both Caroline Ellison(now ex) CEO of Alameda Research or Sam Bankman-Fried, however this report was soon to cause a tidal wave.
November 5 2022: Binance Liquidates their FTT Reserves
A Tweet from Whale Alert shows that on November 5 A Binance wallet transferred over $500 million FTT tokens, soon to be dumped on the market. CZ’s CEO confirms this a day later and posts another tweet stating that“Liquidating our FTT is just post-exit risk management, learning from LUNA.”
Binance dumping their FTT caused many other holders and FTX users to withdraw their funds and dump their FTT tokens onto the market as if they’re radioactive, causing crash in the FTT tokens price.
November 8 2022: FTT crashed, Binance considers bailing FTX out
Due to the major FTT dump that’s been happening since the 5th as a result of Binance announcing they’re dumping FTT as a precaution, the FTT token proceeds to collapse fast, dropping over 80% in a matter of hours
Binance’s CEO CZ and FTX ex-CEO SBF never really got along. There has been significant rivalry between the two in the past, so it’s possible that CZ saw an opportunity to crush his business rival and took it, by singlehandedly causing the FTT token to collapse. If true, this is a ruthless yet brilliant strategy.
Anyway, once FTT crashed, it became apparent that FTX is now insolvent. A lot of people were withdrawing funds, and FTX’s liquidity massively shrunk in a matter of hours. This is where CZ announced that in order to protect user funds and to help FTX cover a “significant liquidity crunch” they considered acquiring FTX.com as part of a non-binding legal agreement after due diligence.
Whatever Binance discovered in their DD was literally a dealbreaker as Binance backed down from the offer. We soon found out what skeletons FTX had been hiding all along.
November 10 2022: News about Bahamas-based sex cult spread on the Internet
In a rather surreal turn to the story, Coindesk reports that FTX was essentially being run by 10 “kids” (ie: young adults under the age of 30) who all lived in the same villa in the Bahamas. Not only that, but Sam and Caroline had been dating, as well as other people living in the house. The “sex cult” memes and jokes spread like wildfire but were short-lived due to the news that was going to break next.
November 11 2022: New CEO Steps in as SBF steps down
John Ray was called in to manage the collapse of FTX and step in as CEO. He previously led energy company Enron through a rocky bankruptcy, and is generally considered to have “Midas touch” with companies in tough situations. He led the efforts to put over $20 billion back int he hands of defrauded investors.
Things were quiet for the next few days, as John Ray had been investigating the crash by himself and deciding how to navigate this.
November 17: New Bankruptcy Report comes to light, and it’s wild stuff
I covered in a previous article just how wild the FTX bankruptcy report really is, and I recommend you read through the whole thing if you want to get the whole picture, but here are the highlights:
- One of the opening lines in the Bankruptcy Report written by the new CEO was: “Never in my career have I seen such a complete failure of corporate controls”. This just sets the tone, things are more FUBAR than you think.
- FTX had no cash management system. Supervisors were approving multi million dollar spend using hand Emojis (“🤙”).
- SBF was communicating through auto-destructing messages and asking people do to the same.
- FTX did not have records of their employees and many times didn’t even know who worked for them and how many employees they had.
- FTX did not have any board meetings.
The list continues and I cannot stress enough how surreal it is that a multi-billion dollar company was operating this way.
November 27 2022: FTX officially under civil and criminal investigation
A national statement made by the office of the Bahamian Prime Minister explained that the “affairs of FTX Digital Markets” are under scrutiny from both “civil and criminal authorities,” and Bahamian authorities are working with “a number of specialists and experts and will continue to do so as the need arises.”
At this point, there would only be a matter of time until SBF would be apprehended by authorities.
November 30 2022: SBF “down to his last $100k”
According to SBF, most of this wealth came from FTT tokens, which after the collapse, meant that SBF’s wealth also shrunk. According to an interview with Axios on November 30, his account was on his last $100k. Not essential news to be aware of but this will become an important detail soon, just keep it in mind for now. It was also around this time, that several other SBF interviews started popping up with him saying that he “Fucked up” and that he essentially “misaccounted $8 billion” as the root cause for the collapse. All of this was nicely explored in this Bloomberg interview (Note: paywall) where the interviewer spent 11 hours with Sam in the Bahamas. I also covered a good part of that interview in an article here, if you’d like to get the highlights without creating a Bloomberg account.
December 7 2022: SBF admitted to Fraud in YouTube interview
Popular Crypto YouTuber Coffeezilla had an Interview with Sam where he basically admitted to fraud.
“I used forbidden customer funds because it was the only way to allow withdrawals during the collapse. If you think I should’ve rushed to code a withdrawal system that actually adhered to FTX terms to protect customer funds, then I disagree with you. You’re just grandstanding”
Great interview by Coffeezilla and I do recommend if you have 20 minutes to burn and feel like getting some Cryptocurrency Lore. This will probably remain central piece of Content in the FTX saga once its all gone and we finally moved forward with our lives.
December 12 2022: SBF is arrested
The U.S. department of Justice announced the arrest of SBF earlier in the evening of Dec 12. The arrest came just before he was supposed to address the Congress, as he was due to testify the following day. Instead of SBF, it was now up to the new CEO John Ray III to address the congress.
December 14 2022: SBF is denied Bail in the Bahamas, aims for U.S. extradition
It was around this period that SBF had been complaining about the lack of “vegan options” in jail, saying that he’s just a “depressed vegan”. Whether that worked or not as a persuation method is uncertain, but SBF managed to eventually get himself extradited to the United Stated where he was eventually able to post bail. This is where the previous article from November 30 “down to his last $100k” becomes relevant.
December 22 2022: SBF released on $250 million bail
After being extradited to the U.S. and had his bail set for a cool $250 million — SBF was able to pay his bail and be released from prison. This is an incredible feat considering the man was on his last $100k. However, SBF argued this by saying that his parents are had to sell their house in order for him to make bail.
December 23 2022: Caroline Ellison testifies against SBF
Although it was clear, given how close both FTX and Alameda Research were to each how, and how they both had pretty much free access to each other’s finances (including customer funds), that Caroline and Sam had been co-orchestrating this thing together, Sam’s ex girlfriend and ex Alamedo CEO Caroline Ellison announced that her boyfriend (SBF) directed her to co-mingle customer funds since 2019, as reported by Bitcoin.com.
This was all part of her plea deal: That she would testify against Sam and forfeit her assets but be get out of this whole mess scot-free. Ellison continued by saying that she understood that what she was doing was not necessarily above board, and that she is truly sorry. Yeah, when you embezzle billions, being “truly sorry” usually does it (/s).
December 24 2022: SBF Judge steps down as husband did previous work as lawyer for FTX
Federal judge Ronnie Abrams of the US District Court for the Southern District of New York formally withdrew from adjudicating the FTX case just one day after having SBF in custody.
It turns out the Jude’s husband is a partner at law firm Davis Polk & Wardwell, which advised FTX in 2021, according to Abrams’ order. Abrams proceeded to recuse herself from the case “to avoid any possible conflict, or the appearance of one.”
December 26 2022: …[pending]…
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