Sam Bankman-Fried, FTX founder and ex-CEO, who led the crypto exchange until it collapsed last month was arrested on Monday in the Bahamas. He was scheduled to testify in Congress on Tuesday about the fall of the exchange. FTX was one of the most valuable firms in the world of crypto until things went downhill after Binance, the world’s largest cryptocurrency exchange, made a U-turn on a deal to save the company. Here’s everything you need to know about the collapse — what led to it and the events that followed since.
The beginning of the end
The seeds of FTX’s downfall were sown several months before the actual collapse. It all started when SBF stepped in to save some other crypto exchanges amid rising interest rates, oblivious to the fact that not long after, his own crypto exchange was to meet the same fate. Those deals also involved SBF’s trading firm, Alameda Research, and led to a series of losses for the exchange.
The face-off between two crypto titans (November 6th)
A CoinDesk report about Alameda showed that much of the firm’s balance sheet was loaded with “highly illiquid” FTT tokens, with some of these tokens put up as collateral to take out loans. While there wasn’t anything fundamentally wrong about that, it showed that Alameda’s foundations rested on a coin a sister company created – and not an independent asset like a fiat currency or another coin.
Not long after the report, Binance announced it will sell off its FTT holdings. FTT is the exchange token of the FTX ecosystem and was often touted as the backbone of the exchange. Binance CEO, Changpeng Zhao, clarified with a tweet that the decision wasn’t a “move against a competitor.”
FTT value tanks, CZ reveals acquisition of FTX (November 8th)
CZ (Changpeng Zhao) reveals that Binance has entered into a non-binding agreement to buy out FTX after the FTT token’s value falls to $6 from over $22.
Acquisition falls through (November 9)
Binance changes its mind about pursuing the deal to bail out FTX. A Binance spokesperson said this was decided due to the reports about mishandled customer funds and US agency investigations.
FTX suspends onboarding of new clients and funds (November 10)
FTX suspends onboarding of new clients and pauses withdrawals until further notice as the acquisition falls through along with any hopes to rescue the exchange. The company also asked clients to avoid depositing their funds. On the same day, SBF announces that Alameda Research is shutting down. Authorities in the Bahamas freeze FTX assets.
FTX files for bankruptcy (November 11)
FTX and affiliates file for bankruptcy in Delaware, US, leaving around a million customers and several investors looking at billions of dollars in losses. SBF resigns as CEO and is replaced by John J. Ray III. On the same day, FTX is hacked and over $300 million is stolen from the exchange.
SBF gets sued (November 15)
SBF and various celebrity endorsers of FTX are sued in Florida federal court by Edwin Garrison, an FTX investor, alleging deception of clients.
US House announces hearing to investigate collapse (November 16)
The US House Financial Services Committee announces that it plans to hold a hearing in December to investigate the FTX collapse, saying it expects to hear from the companies and individuals involved.
SBF makes public appearance (December 1)
SBF makes his first public appearance since his crypto empire collapsed, insisting that he “did not ever try to commit fraud.” He blamed “huge management failures” and sloppy accounting for the collapse.
SBF possible market manipulation investigated (December 8)
US prosecutors in New York examine the possibility that SBF manipulated the prices of TerraUSD and Luna to benefit the entities he controlled.
SBF set to testify (December 10)
SBF is set to testify before a US House committee on Tuesday, the crypto exchange founder and the congressional panel said.
SBF arrested (December 13)
SBF is arrested in The Bahamas after being criminally charged by US prosecutors.
A statement from the the Bahamas Police said: “He was arrested reference to various Financial Offences against laws of the United States, which are also offences against laws of the Commonwealth of The Bahamas.” The statement added that he was taken into custody and will appear in Nassau’s Magistrate Court on Tuesday.
