Timeline: Looking Back At The Rise & Fall Of FTX's Collapse As Sam Bankman Fried Gets Set For Trial

The last year or so has seen the collapse of 'crypto robinhood' Sam Bankman Fried and his cryptocurrency firm FTX.

FTX was worth a whopping $32 billion at its peak, and Sam Bankman Fried's (SBF) personal net worth was once an estimated $16 billion before it all crashed down.

After a tumultuous period marred by a long list of criminal charges and the possibility of a more than 100-year jail sentence, the trial of Sam Bankman-Fried is set to begin next week. But before the trial for one of the biggest frauds in the US begins, let us look back at the rise and fall of FTX and its founder, SFB.

FTX's Collapse: How It All Began

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NOVEMBER 2017

Sam Bankman-Fried, a Massachusetts Institute of Technology graduate, quits his job as a quantitative trader at Jane Street Capital and launches Alameda Research, a trading firm focused on cryptocurrency.

MAY 2019

Bankman-Fried and former Google employee Gary Wang found FTX as a new platform to trade crypto tokens and derivatives.

OCTOBER 2021

FTX raises $420 million in venture funding, valuing the company at $25 billion. As per a Reuters report, Sam Bankman-Fried debuts on the Forbes billionaires list, which estimates his net worth at $22.5 billion. The magazine¡¯s assessment of his wealth would rise to $26 billion by the end of the year.

FEBRUARY 2022

The NFL Super Bowl¡¯s broadcast is heavy on cryptocurrency advertisements, signifying the height of the craze for the booming asset class. FTX¡¯s ¡°Don¡¯t Miss Out¡± spot features actor Larry David, whose scepticism about the platform is portrayed as akin to an early human doubting the importance of the wheel.

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Also Read: Indian-origin Engineer At FTX Pleads Guilty To Fraud Charges In US

JUNE-JULY 2022

Sam Bankman-Fried emerges as the cryptocurrency sector¡¯s so-called ¡°white knight¡± amid a collapse in the prices of Bitcoin and other digital assets. Alameda gives crypto lender Voyager Digital a $200 million credit facility, and FTX gives lender BlockFi a $250 million loan.

NOVEMBER 2, 2022

Crypto news website CoinDesk publishes a leaked Alameda Research balance sheet showing that much of its $14.6 billion in assets is held in FTX¡¯s own token, called FTT. The token subsequently sheds around $400 million of its market cap, and rival exchange Binance says it will sell its FTT holdings.

NOVEMBER 8, 2022

After FTX sees $6 billion in customer withdrawals in three days, As per the report Binance CEO Changpeng Zhao says the company has signed a nonbinding agreement to buy FTX¡¯s non-U.S. unit. Binance scraps the deal the next day.

NOVEMBER 11, 2022

FTX files for U.S. bankruptcy protection, and Bankman-Fried resigns as its chief executive officer.

NOVEMBER 16, 2022

David and other FTX celebrity promoters, including NFL quarterback Tom Brady, are sued over claims they engaged in deceptive practices. The celebrities have said the suit should be dismissed, arguing they did not cause FTX investors¡¯ losses.

DECEMBER 12, 2022

"Michael Jordan of crypto" Sam Bankman-Fried is arrested in the Bahamas, where he lives and where FTX is based. The U.S. Attorney¡¯s office in Manhattan later confirms that a federal grand jury has indicted him for fraud and conspiracy charges.

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DECEMBER 21, 2022

Sam Bankman-Fried leaves the Bahamas after agreeing to be extradited to the United States. While he is in the air, prosecutors reveal that Wang and Alameda chief executive Caroline Ellison have pleaded guilty and agreed to cooperate with prosecutors.

DECEMBER 22, 2022

Bankman-Fried makes an initial appearance in Manhattan federal court and is released to home detention at his parents¡¯ home in Palo Alto, California, on $250 million bond.

JANUARY 3-12, 2023

Sam Bankman-Fried pleads not guilty and U.S. District Judge Lewis Kaplan schedules his trial for October. In a post-arrest blog post, Bankman-Fried denies stealing funds and blames FTX¡¯s collapse on a broader downturn in crypto markets.

FEBRUARY 28, 2023

Nishad Singh, the former director of engineering at FTX, adds to the pressure on Bankman-Fried by becoming the third former member of his inner circle to plead guilty to fraud charges and agreeing to cooperate with prosecutors.

AUGUST 11, 2023

Kaplan revokes Bankman-Fried¡¯s bail after finding probable cause to believe he tampered with witnesses at least twice, including by sharing Ellison¡¯s private writings with a New York Times reporter. Bankman-Fried is remanded to Brooklyn¡¯s Metropolitan Detention Center pending trial. (Reporting by Luc Cohen in New York; Editing by Noeleen Walder and Daniel Wallis).

What Is Sam Bankman-Fried Charged With?

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Sam Bankman-Fried¡¯s FTX was a crypto exchange that allowed its users to buy, sell and hold cryptocurrencies, and use financial mechanisms to bet on those tokens¡¯ price movements. Bankman-Fried told Congress in a February 2022 hearing that ¡°as a general principle, FTX segregates customer assets from its own assets across our platforms.¡±

But prosecutors allege that instead of keeping customer funds siloed, FTX officials loaned those deposits to Alameda Research, Bankman-Fried¡¯s hedge fund, at the founder¡¯s direction. Prosecutors allege, first, that Bankman-Fried oversaw a technical ¡°backdoor¡± that allowed him to funnel money out of FTX customer accounts undetected¡ªand, second, that he then used those funds to buy luxury real estate, donate to political campaigns, and repay Alameda¡¯s lenders. Upon filing for bankruptcy, FTX owed its top 50 creditors alone $3.1 billion. Last month, court papers filed by Bankman-Fried¡¯s lawyers said that he had a ¡°good faith belief¡± that the way FTX and Alameda handled customer funds was permitted, Reuters reported.

While SFB faces 13 charges in total, only seven of those will be heard during this initial trial of October. A separate trial is scheduled for March 2024, which will include allegations of campaign finance violations.

Also Read: 5 Crypto Firms That Filed For Bankruptcy Besides FTX

How Will The Former FTX CEO Defend Himself?

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Sam Bankman-Fried has passed around the blame for FTX¡¯s failure. He has acknowledged that he made mistakes and inadequately managed risk at the company. But he has accused Ellison of being an incompetent investor and of ignoring his guidance. He says he was given bad legal advice and was the victim of larger market forces pushing crypto downward. He could also attempt to undermine the credibility of those who will testify against him. His new lawyers were recently granted permission to cross-examine witnesses about their recreational drug use.

Sam Bankman-Fried will remain in jail for the duration of the trial, meaning he will have little time to confer with his lawyers at the end of each trial day. Instead, he will be allowed to meet with his attorneys at 7 a.m. every morning of trial dates. His lawyers have claimed that he has been subsisting mostly on bread and water while in jail.

It¡¯s unclear yet whether Bankman-Fried himself will take the stand or not.

Why Is Sam Bankman Fried Called 'Crypto Robinhood'?

For all his wealth, Bankman-Fried had said last year that his core philosophy remains the same. He¡¯ll keep enough money to maintain a comfortable life: 1% of his earnings or, at minimum, $100,000 a year. Other than that, he still plans to give it all away every dollar, or Bitcoin, as the case may be.

So, he¡¯s a kind of crypto Robin Hood, beating the rich at their own game to win money for capitalism¡¯s losers. As per Bloomberg, Bankman-Fried said he doesn¡¯t see much value in buying things, adding that ¡°You pretty quickly run out of really effective ways to make yourself happier by spending money. I don¡¯t want a yacht."

The crypto industry, which is often hit by scams, might seem like an odd choice for a do-gooder like SBF. But Bankman-Fried doesn¡¯t see it that way. SBF says his company FTX is running an honest market, checks customers¡¯ backgrounds, buys carbon credits to offset its emissions, and is more efficient than the mainstream financial system. But it¡¯s clear the main appeal for him is getting rich quick.

He also said ¡°Ideally, I would want FTX to become the biggest source of financial transactions in the world."

As by far the richest person to emerge from the effective altruism movement, a question that arises is whether should someone like Bankman-Fried who wants to save the world, first amass as much money and power as possible or will the pursuit towards money corrupt him along the way? It remains to be seen how far the crypto billionaire goes on to give away his billion-dollar fortune.

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