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FTX lawsuit timeline: How did Sam Bankman-Fried get right here?

The extremely anticipated prison trial for Sam Bankman-Fried, former CEO of bankrupt crypto trade FTX, begins Tuesday to find out whether or not he’s responsible of seven counts of fraud and conspiracy.

The 31-year-old co-founded FTX in 2019; inside a couple of years the as soon as third-largest crypto trade’s valuation hit $32 billion at its peak. It’s now making an attempt to claw again any funds to distribute to collectors.

However how did the as soon as third-largest crypto trade get right here?

Earlier than FTX, Bankman-Fried co-founded crypto-trading agency Alameda Analysis in 2017. He co-founded FTX in 2019 as a complement to Alameda, to assist usher in income and liquidity for the buying and selling arm.

Inside two years, over 80 traders offered about $2 billion in capital to FTX, serving to Bankman-Fried propel his imaginative and prescient right into a actuality. In January 2022, the corporate raised $400 million in a Collection C spherical, boosting its valuation to $32 billion. That was its final spherical of public funding.

The corporate gained considerably mainstream recognition with branding offers and partnerships. For instance, in 2021 it purchased the naming rights for the Miami Warmth’s residence enviornment. FTX additionally obtained its title branded on Main League Baseball umpires’ polos, and it partnered with celebrities like Tom Brady and his ex-wife, Gisele Bündchen, in addition to Steph Curry, Shaquille O’Neal and Naomi Osaka, amongst others. He additionally had shut ties to U.S. regulators and authorities officers, lots of whom he donated to.

Bankman-Fried was even in comparison with Warren Buffet and lots of known as him the white horse of crypto (TechCrunch by no means did, for what it’s value).

However in early November 2022, that every one modified.

FTX’s collapse

Issues surrounding FTX’s liquidity grew after CoinDesk revealed a duplicate of Alameda’s steadiness sheet, exhibiting the agency held $14.6 billion in property and $8 billion in liabilities as of June 30, 2022.

However there was an issue: The report confirmed Alameda’s largest asset was $3.66 billion of “unlocked FTT” and $2.16 billion of “FTT collateral.” FTT was the token behind FTX.

The steadiness sheet confirmed that the $5.82 billion in FTT tokens that Alameda owned was 193% larger than the full FTT market cap, which was about $3 billion on the time. Meaning it presupposed to have extra FTT tokens on its steadiness sheet than what existed on this planet.

Across the identical time it was uncovered, the world’s largest crypto trade, Binance, began pulling out its remaining $2.1 billion equal of money in BUSD and FTT. (It had an fairness place in FTX from 2019 to 2021.) This primarily triggered a financial institution run on FTX.

FTX and Alameda filed for Chapter 11 chapter within the U.S. mid-November 2022. Bankman-Fried resigned, and John J. Ray III, the Enron turnaround veteran, was appointed its new CEO.

Bankman-Fried, nevertheless, maintained his innocence. At The New York Occasions’ DealBook Summit, he appeared just about from the Bahamas, saying “I didn’t ever attempt to commit fraud on anybody; I used to be shocked by what occurred this month.” In a printed DM trade with a Vox reporter, he mentioned he regretted submitting for chapter and thought that “regulators make every thing worse.”

SBF arrested

Bankman-Fried was arrested in December 2022 within the Bahamas, the place FTX was primarily based. He was then extradited to the U.S. to face quite a lot of prison expenses. He was launched on a $250 million bail bond, and he remained underneath home arrest at his dad and mom’ residence in Palo Alto. This was revoked in August after he was accused of intimidating Alameda’s former CEO, Caroline Ellison, by leaking her personal diary.

Ray represented the corporate throughout a Home Monetary Companies Committee listening to concerning FTX. When requested whether or not the agency had vital danger administration techniques, Ray mentioned on the time that “there have been just about no inner controls and no separateness in any way” and added that he didn’t “belief a single piece of paper” within the trade’s group. U.S. Lawyer Damian Williams known as Bankman-Fried’s alleged crimes “one of many greatest monetary frauds in American historical past,” in a press convention.

The aftermath

FTX co-founder and former CTO Gary Wang, and Alameda Analysis’s former CEO, Caroline Ellison, each pled responsible in December 2022 to federal prison expenses in relation to the FTX collapse. They’re additionally dealing with civil penalties from the SEC and CFTC alongside the prison expenses. Wang and Ellison plan to cooperate with prosecutors and will likely be main witnesses within the trial, given their shut ties to Bankman-Fried, FTX and Alameda.

In January, Bankman-Fried pleaded not responsible to all counts, which embody wire fraud, conspiracy to commit cash laundering, and conspiracy to misuse buyer funds. He might resist 115 years in jail if convicted on all expenses.

The crypto business as a complete suffered from FTX’s collapse, which was the primary of many. BlockFi filed for Chapter 11 in November 2022, as did Genesis World Buying and selling in January.

The place we’re right this moment

Bankman-Fried will likely be represented by Cohen & Gresser, and Mark Cohen, a high-profile protection lawyer and former federal prosecutor, would be the lead lawyer. If that title sounds acquainted, it may be as a result of he additionally represented Ghislain Maxwell in her intercourse trafficking trial associated to Jeffrey Epstein. He requested an early launch for Bankman-Fried however was denied.

On Tuesday, we’ll begin to see how FTX’s story ends. However what’s on our thoughts is what occurs to the traders and collectors affected by the collapse? And what occurs to the billions in crypto property tied up in authorized proceedings?



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