There is an air of gaiety associated with the song “12 Days of Christmas”. For 30-year-old Sam Bankman-Fried, however, the first 12 days of November were probably the toughest: he not only lost his crypto exchange but also went from being a billionaire and the industry’s “saviour” to declaring bankruptcy and owing clients at least $3 billion.
The next few days showed that the once-dominant crypto exchange FTX run by SBF, as he is known, was not what it seemed. And on Monday local time, he was arrested in the Bahamas, where he had made his base, on a request by US prosecutors.
Here is a timeline of the last month and a half, which culminated in Bankman-Fried’s arrest.
The start of the end
Nov. 2: The entrepreneur and his enterprise ran into trouble after crypto media outlet CoinDesk published a contentious article exposing crucial information in the balance sheet of SBF’s trading company Alameda Research. According to the publication, Alameda had a sizable stake in the native token, FTT, of the FTX exchange.
Two crypto giants compete
Nov. 6: Caroline Ellison, CEO of Alameda Research, dismissed allegations that the company’s balance sheet was in trouble. The Coindesk analysis, in her opinion, only represented a portion of Alameda’s financial picture. She pointed out that the trading company had assets worth more than $10 billion that were not disclosed in the report.
A few hours later, Binance, the primary rival of FTX, declared it would be liquidating all the FTT assets it had purchased as part of its 2021 investments in FTX. Binance CEO Changpeng Zhao said that the decision was made as a result of “recent disclosures that have come to light” about FTX.
Later, without specifically mentioning FTX, he tweeted that his company would not assist “those who campaign against other industry participants behind their backs”. Speculators, however, think Zhao was referring to SBF’s contentious tweets and FTX’s associations with authorities.
To offset the market impact of the liquidation, Ellison offered to buy back Binance’s FTT holdings for $22 per token. Zhao declined the offer a day later, saying that his company wanted to remain in the open market.
He additionally verified that $584 million worth of FTT was transferred from an unidentified wallet to Binance as part of the liquidation procedure.
SBF: FTX and assets are in good shape
Nov. 7: Despite calling for peace and urging Zhao and others to “make love (and blockchain), not war,” SBF continued to criticise Binance and its CEO on Twitter.
Customers were reassured by him that FTX and the assets on the exchange were secure, and he also mentioned that his business had more than $1 billion in surplus cash. However, the coming days would show that nothing, least of all user deposits and investor funds, was ever okay with FTX.
SBF claimed in a since-deleted tweet that a rival was attacking his business with “false rumours”, without mentioning Binance or anyone else, for that matter.
It was later this day that Zhao turned down Ellison’s offer to repurchase Binance FTT holdings, and when investors started to sell their own, leading to the price of the token falling 80 percent.
Binance offers bailout as withdrawals halted by FTX
Nov 8: Reports that his exchange had ceased processing user withdrawals were confirmed less than 24 hours after SBF tweeted that the assets were fine. Since the rolling disaster began on November 2, which was the first indication of FTX’s true situation.
A few hours later, FTX saw a glimmer of hope when Binance came to the company’s aid. After SBF requested assistance, Zhao tweeted that his exchange had inked a non-binding deal to buy FTX.
The news was well received by the crypto market, but nobody anticipated that the high-profile rescue would never materialise and that this was fated to be a short, doomed love affair.
Binance turns around, contagion spreads
Nov. 9: Zhao was widely expected to announce the successful takeover. However, Binance instead said that it had changed its mind and was abandoning the deal. Zhao said that after performing “corporate due diligence”, his business understood that FTX’s financial difficulties were beyond his company’s “control or power to help”.
This news sent the entire cryptocurrency market into complete disarray. Bitcoin, the leading cryptocurrency, fell below $16,000 for the first time since 2020, FTT continued with its tailspin, and SBF lost 95 percent of his net worth and his billionaire status.
A few hours later, the chain reaction from FTX’s liquidity squeeze began to be felt by the wider cryptocurrency market. Considering the significance of FTX and Alameda to the Solana ecosystem, the Solana blockchain suffered a serious blow. Withdrawals were eventually stopped on several cryptocurrency platforms due to their high exposure to FTX.
Interestingly, before Binance backed out of the agreement, FTX’s legal and compliance team reportedly left the exchange.
SBF offers apologies and seeks investors
Nov 10: As Binance was no longer an option, SBF was forced to seek assistance from other sources, including rivals and prominent players in the cryptocurrency industry like OKX and Justin Sun, the founder of Tron.
Additionally, he expressed regret on the cryptocurrency Twitter platform, where he acknowledged several errors, including the incorrect calculation of FTX’s liquidity that led to the company’s failure.
SBF also promised to compensate FTX consumers, stating that he was working as hard as he could to provide liquidity but that he was unable to offer any guarantees. After that, he disclosed that Alameda Research will suspend trading to save FTX.
FTX US, the FTX subsidiary in the United States, initially stated that it was “100% liquid” and had not been “financially harmed” by the liquidity crisis at FTX, but then announced on its website that it would be suspending trading shortly.
Following SBF’s tweets, on-chain data revealed that FTX had resumed withdrawals 48 hours after the service had been suspended.
SBF steps down and declares bankruptcy
Nov. 11: SBF filed for Chapter 11 bankruptcy protection for FTX, FTX US, Alameda Research, and over 130 associated firms after failing to find someone to save his crypto empire. This was his final act before stepping down as FTX CEO.
SBF was succeeded as CEO by John J. Ray III, but the business stated that SBF will stay on to “help in an orderly transition”.
BlockFi, a cryptocurrency lending company, stopped withdrawals later that day due to the uncertainties surrounding the liquidity situation at FTX.
In July, BlockFi had received a $400 million line of credit from FTX in exchange for an option to purchase the company for up to $240 million from Bankman-Fried. After Voyager and Three Arrows Capital failed, the plan was to stabilise the business and the sector.
However, BlockFi is now on its own after FTX’s failure, and the lender is considering filing for bankruptcy.
$477 million disappears as regulators intervene
Nov. 12: A mysterious withdrawal of around $500 million worth of assets from the exchange and accounts connected to FTX US occurred less than 24 hours after FTX filed for bankruptcy. Many people believed that hackers had taken advantage of the companies to steal the money, but later reports showed that the Securities Commission of the Bahamas had really carried out sizeable withdrawals.
Later that day, Bloomberg reported that SBF had been questioned by the Bahamas police and securities watchdog in connection with a criminal misconduct probe involving FTX.
FTX contagion continues
Nov. 13: According to reports, employees of the company were also affected by the FTX crash because SBF and his inner circle actively promoted the crypto empire both internally and publicly.
An FTX employee said that the company urged staff to invest in FTX shares and FTT tokens and get their bonuses in those assets. Employees’ money was thus stored on the platform, and when the business failed, they were unable to access their investments.
Despite denying any exposure to FTX, the cryptocurrency exchange AAX stopped withdrawals on the same day. According to the trading platform, the suspension was brought on by a “third-party partner” who was undertaking a system upgrade. Later, AAX announced that it was seeking additional funding as a result of some of its investors withdrawing money owing to the FTX scandal.
On November 14, more cryptocurrency businesses with FTX exposure began experiencing liquidity problems. Due to “abnormal withdrawal requests”, cryptocurrency brokerage business Genesis Global Trading suspended withdrawals for its loan division, the company said.
Gemini, a cryptocurrency trading platform, declared shortly thereafter that it could no longer handle withdrawals from its Earn programme. Gemini and Genesis are business partners in lending products.
The non-crypto partners of FTX, including Visa and the NBA teams Miami Heat and Golden State Warriors, started severing their links with the exchange.
Liquid Global, a Japanese cryptocurrency exchange that FTX had acquired, was the next to halt withdrawals on November 15. According to the platform, the action complied with FTX’s US Chapter 11 bankruptcy filing.
SALT, a platform for crypto lending, also stopped withdrawals due to heavy exposure to FTX.
Serious fraud and improper handling of users’ money
Nov. 16, FTX Digital Markets Ltd., a company based in the Bahamas, filed for Chapter 15 bankruptcy protection in the US.
Nov. 17: Serious fraud and improper handling of users’ funds were mentioned in the bankruptcy document by court-appointed liquidators. Further investigation into the bankruptcy filing uncovered some disturbing information regarding FTX, including management lavishly spending company money on personal assets and not properly recording users’ deposits.
Nov. 20: According to FTX, it owes 50 of its largest creditors almost $3 billion, with the two largest individual claims being $226 million and $203 million.
Nov. 21: According to reports, FTX Japan, the company’s Japanese subsidiary, said it planned to start withdrawing money by the end of the year.
Nov. 22: As bankruptcy procedures advanced, details of the money supporting SBF’s empire start to emerge. Although FTX executives claimed to have found assets worth $1.4 billion, they cautioned that it might still take a few more weeks to construct a complete balance sheet.
Tax papers also show that FTX and Alameda Research lost $3.7 billion combined between 2019 and 2021, a long time before the present scandal, showing that things in the SBF empire were never as prosperous as they may have seemed.
Nov. 28: Crypto lender BlockFi files for bankruptcy
Cryptocurrency platform BlockFi filed for Chapter 11 bankruptcy in New Jersey and blamed its failure on its exposure to FTX. The company claimed in a press release that the FTX collapse severely harmed it, leading to a liquidity issue.
Dec.10: Sam Bankman-Fried in an interview with the BBC from the Bahamas said he plans to start a new company in order to reimburse his clients. The disgraced businessman stated that in order to recover the lost assets of his consumers, he would “sacrifice anything” to be able to launch a new business.
“I’m going to be thinking about how we can help the world, and if users haven’t gotten much back, I’m going to be thinking about what I can do for them,” Bankman-Fried told the BBC. “And I think at the very least I have a duty to FTX users to do right by them as best as I can.” He added, “I would give anything to be able to accomplish it,” when asked if he would launch a new company to repay investors. “And I’ll make the best effort I can.”
Sam Bankman-Fried was detained in the Bahamas on December 12
According to a statement from the Bahamas government, Sam Bankman-Fried was detained on Monday due to pending criminal accusations.
His arrest was announced on Twitter by the Southern District of New York (SDNY), which is looking into Bankman-Fried and the collapse of FTX and its sibling trading company Alameda.
According to a sealed indictment submitted by the SDNY, Samuel Bankman-Fried was detained by Bahamian authorities early Tuesday morning Indian Standard Time at the US government’s request, according to US attorney Damian Williams.
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