[Timeline] The Rise and Fall of FTX Chief Sam Bankman-Fried

Former Futures Exchange (FTX) CEO Sam Bankman-Fried has pleaded guilty to eight criminal charges and is awaiting criminal trials in 2024.

The collapse of FTX has become the single largest event plaguing an already beleaguered cryptocurrency market. Prior to bankruptcy, FTX was the second-largest exchange and saw nearly $30 billion in daily volume in November 2022.

In a recent series of tweets, Bankman-Fried admitted to the crimes and explained how he and FTX got into the scandal. "I f***ed up, and should have done better," he said.

Who is Sam Bankman-Fried?

Samuel Benjamin Bankman-Fried was born in 1992 in Stanford, California, from Stanford Law School professors Alan Joseph Bankman and Barbara Fried. He graduated from the Massachusetts Institute of Technology (MIT) in 2014 with a bachelor's degree in physics and mathematics.

Prior to FTX, he worked for Jane Street Capital, a firm focused on international exchange-traded funds (ETFs). He left Jane Street in 2017 and briefly worked at the Centre for Effective Altruism's (CEA) Berkely office before co-founding the quantitative trading firm Alameda Research with former CEA CEO Tara Mac Aulay before quiting in 2018 partially "due to concerns over risk management and business ethics."

By 2018, he shifted his interest to the crypto market and took advantage of the higher price of bitcoin in Japan compared to the United States. It was also around this time that he moved to Hong Kong.

Before his downfall, Bankman-Fried's net worth peaked at $26 billion but has decreased to $991.5 million by November 2022 when FTX collapsed.

SBF and the Rise of FTX

FTX was founded in May 2019 by Bankman-Fried and ex-Google employee Gary Wang. Bankman-Fried had been running Alameda as his trading desk, making a name for himself as a talented trader and raising money for his venture.

Early-stage investors included Pantera Capital, Sequoia Capital, Digital Currency Group, Binance, and Consensus Labs.

In 2020, Bankman-Fried supposedly invested in SushiSwap, though the details of how it played out have since been questioned. The fall of that year put FTX in a position where it needed more than an excellent reputation to compete with other centralized crypto exchanges.

By October 2020, FTX launched "fractionalized stock trading" for Tesla, Apple, and Amazon derivatives. In December of that year, it launched "tokenized stocks" for five cannabis-focused companies. "To be blunt, this is one of the dopest joint listings we've done," Bankman-Fried wrote in a pun-filled tweet then.

During this time, Bankman-Fried became one of the biggest donors of Joe Biden's 2020 presidential campaign.

Bankman-Fried spent all of 2021 getting FTX in front of sports fans, from Formula 1 to the NBA to Major League Baseball to esports. FTX also made agreements with several athletes, such as Tom Brady, Stephen Curry, Naomi Osaka, and 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," Bankman-Fried said in the pilot 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 the deals made have since been called off.

FTX at its Peak

In July 2021, the company bought out Binance's equity shares, which would prove to be pivotal to its undoing. "We recently repurchased shares from Binance to buy them out of our cap table," Bankman-Fried said. "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."

Meanwhile, Binance CEO Zhao Changpeng recently refuted Bankman-Fried's narrative, saying it was Binance that chose to divest from FTX because of the company's very close association with its sister firm Alameda.

FTX used $2.1 billion worth of Binance USD and FTX Token (FTT) to buy out Binance's equity in the company, which meant Binance was still sitting on hundreds of millions worth of FTT by the time things fell apart.

The Downfall of FTX

By June 2022, Luna's algorithmic stablecoin TerraUSD wiped out $40 billion from the crypto market in one of the largest crypto collapses of the time. Because of this, it sent a stablecoin meant to hold a one-to-one peg with the US dollar all the way to zero.

In its wake, the crypto hedge fund Three Arrows Capital (3AC) became insolvent as it maintained a large Terra position and has been borrowing heavily from all major crypto lenders to fuel its high-stakes investment strategies.

During this time, Bankman-Fried said the industry should be helping struggling companies in the wake of all the bankruptcies. "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 in an NPR interview. "Even if we weren't the ones who caused it, or weren't involved in it. I think that's what's healthy for the ecosystem, and I want to do what can help it grow and thrive."

However, the inevitable happened in November 2022, when FTX began collapsing after several reports alleged Alameda Research to have billions in FTT on its balance sheet against billions in liabilities.

As a result, investors quickly realized Alameda had no good options for survival. One of the first to pull out was Binance, after Zhao announced his company would sell its $580 million stash of FTT. Instead, the panic led investors to pull off FTX's exchange.

FTX initially tried to cut their losses by having a non-binding agreement to be acquired by Binance, but to no avail.

By November 11, 2022, FTX filed for bankruptcy, and Bankman-Fried resigned as CEO. In its filing, the company disclosed it owed between $10 billion and $50 billion to creditors.

Arrest and Trial

In the aftermath of FTX's collapse, Bankman-Fried conducted a media blitz, insisting his non-involvement with the company's downfall. He added that he did not intentionally commingle client and company funds.

Nevertheless, he was charged with eight crimes, including wire fraud and conspiracy to commit money laundering. FTX's prospective brand ambassadors were also charged in the lawsuit at this point.

Sam Bankman-Fried was arrested in the Bahamas on December 12, a month after the collapse of FTX.

After a week in a Bahamian jail, Bankman-Fried was extradited to the United States on December 21 but quickly applied for a bail worth $250 million. It was revealed FTX co-founder Wang and former Alameda CEO Caroline Ellison pleaded guilty to their own charges and were cooperating with authorities in building a case against Bankman-Fried.

Bankman-Fried initially pleaded not guilty on all charges on January 3, 2023, but has since reversed and trials are scheduled to take place in 2024.

The US Department of Justice intended to try Bankman-Fried on the original eight charges, while the Bahamian Supreme Court is yet to decide whether to add the five additional charges out of the Caribbean country, which Bankman-Fried's legal team requested more time to review.

The Bahamian government originally filed five additional charges on top of the American case since FTX was registered in the Bahamas. As of writing, there are no independently verified updates regarding the Bahamian Supreme Court's decision.

Aftermath

According to the BBC, Bitcoin's value dropped to a two-year downtrend after Binance pulled out of a deal to save FTX.

Meanwhile, the stock market value of the online trading platform Robinhood fell by more than 19%, while Coinbase fell by 10%.

As a commentary on FTX's downfall, Mac Aulay reflected on her decision to part ways with Bankman-Fried back in 2018. "I started Lantern Ventures and Pharos Fund with some of this group [of former FTX employees] to do things differently," she tweeted in hindsight. "We have never had any connection to Sam, FTX, or Alameda, except for recently starting to trade on FTX with small size. I have not even spoken to Sam since 2018."

"I am shocked, appalled, and frankly, angry." she added. "Sam's actions are a perversion of everything crypto stands for. My heart goes out to all of the victims whose trust was betrayed, savings lost, and livelihoods destroyed."

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