One year ago, serious cracks started to appear in Sam Bankman Fried’s crypto-empire.
FTX was the world’s second-largest cryptocurrency exchange within just six days. However, it is now bankrupt and has unaccounted deposits of $8 billion.
All of this would come out in the months following FTX’s collapse. Rigorous investigations, led by the current FTX CEO, John J. Ray III — made famous by Enron — were corroborated by testimonies from employees and key members of Bankman-Fried’s team during his October 2023 trial.
Caroline Ellison, former Alameda CEO claimed that Ellison demanded seven falsified balance sheets of Alameda. Bankman Fried denied that in his testimony. He claimed he couldn’t remember the other versions Ellison created.
“I recall [Ellison] saying that she was tentatively planning on sending something like this out, that she had thought about a few different ways of constructing it,” Bankman-Fried testified.
Former FTX engineering director Nishad said Bankman Fried was aware of a hole of $13 billion in FTX’s financial statements as early September. Adam Yedidia is a software engineering at FTX. He convinced Bankman Fried to acknowledge that FTX’s balance sheet was not accurate. “bulletproof” Back in June 2022
He confirmed in part the conversation between Yedidia and Bankman-Fried. He actually used the word “bulletproof,” When asked about the $13 billion hole that Singh had mentioned, Bankman-Fried said he was not speaking in the same context as what his ex-employee claimed. In response to Singh’s claim of a $13 billion gap, Bankman Fried told Danielle Sassoon, the prosecutor, that it was not his intention. “probably” Discussion of the issue on Signal with Ellison.
This is a recap of what happened in November.
Alameda leaked financial statement and its aftermath, Wednesday Nov. 2, to Saturday Nov. 6,
The CoinDesk Report of Wednesday, November 2, revealed that Alameda had a balance sheet worth $3.66 Billion. This was the catalyst to its eventual collapse. “unlocked FTT.” The second $2.16 billion was a result of the influx “FTT collateral.”
Alameda had assets worth $14.6billion, of which nearly $6bn was FTT. Bankman-Fried created this token specifically for FTX. A large portion of the total was collateralized for loans.
Ellison, the CEO of Alameda at the time, did not comment on CoinDesk’s story. However she was to reveal all in Bankman Fried’s criminal case less than one year later.
Binance’s FTT sale on November 6, Sunday.
Binance CEO Changpeng Zhao appeared on the scene four days following the CoinDesk article.
Binance will remove FTT completely from its balance. Binance acquired many FTT tokens in 2021 when it returned its equity to FTX, a $2.1 billion deal.
“Due to recent revelations that have came [sic] to light, we have decided to liquidate any remaining FTT on our books,” Zhao writes “Regarding any speculation as to whether this is a move against a competitor, it is not. Our industry is in it’s [sic] nascency and every time a project publicly fails it hurts every user and every platform.”
Monday, Nov. 7: “FTX is fine. Assets are fine.”
Through a Twitter post, Bankman Fried sought to assure investors, claiming “a competitor is trying to go after us with false rumors,” You can also find out more about the following: “FTX is fine. Assets are fine.”
Gary Wang, former chief technical officer of FTX, contradicted this statement in full during his testimony before the Senate on October 6, 2023.
“FTX did not have enough assets for customer withdrawals,” Wang said. “FTX did not in fact have enough assets to cover all client holdings…because Alameda had withdrawn a lot of it.”
In his direct examination of Bankman-Fried he claimed: “At the point where I posted [the tweet], Alameda still had a net asset value of roughly positive $10 billion. FTX had no holes on its balance sheet. And there had been no attack on the customer assets. And so my view at the time was that the exchange was okay and that there, you know, there was…no hole in terms of assets.”
He claimed that, however, the tweet was deleted once he realized that things were not going well.
Tuesday, 8 November: Binance to the rescue?
By November 8, FTX has reached a crisis point. In the last 72 hours, customers had withdrew approximately $6 billion. Now, withdrawals have been halted.
FTX needed to find a solution, fast, given the 8 billion dollar hole they would discover later.
Binance has announced it will buy FTX.com (the non-US company) just a few days after it revealed that all of its FTT worth $529m would be sold.
Zhao said that Binance had offered to help FTX cover its costs. “liquidity crunch.” FTX’s rival signed a letter of non-binding intent to purchase the troubled exchange.
FTT began to plummet. CoinGecko reports that after starting the day at nearly $17 on Nov. 8, it fell to $4.23 in the afternoon.
Christian Drappi testified in court that he worked throughout November, as a software developer at Alameda, to accelerate FTX withdrawals. He was stationed at the Hong Kong offices shared by Alameda staff and FTX. Ellison, two Alameda traders and Ellison were all present.
Drappi ceased working on Nov. 8, around 11am ET (11:30pm in Hong Kong) after learning about the purchase.
“I was utterly shocked,” Drappi said.
Binance’s Wednesday, November 9, 2018 withdrawal leaves little or no hope
Binance retracted its letter of Intent on November 9.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” Binance writes. “The issues are beyond our control or ability to help.”
It was a death blow to FTX. Ellison claims that Bankman-Fried tried to obtain more capital, but failed. According to former FTX lawyer Can Sun’s testimony and Bankman Fried himself, the former FTX chief executive also tried to obtain last-minute financing from Apollo.
Thursday, Nov. 10: SBF says he f**ked up
Bankman-Fried, who just three days earlier told the world that FTX and its assets are fine, has now revealed via Twitter that he is not fine. “sorry” And that he “should have done better.”
Bankman-Fried began his defense by claiming that he had been an incompetent chief executive and was not fully aware of the happenings at both of his companies.
“…At the end of the day, I was CEO, which means that *I* was responsible for making sure that things went well. *I*, ultimately, should have been on top of everything,” Bankman-Fried wrote. “I clearly failed in that. I’m sorry.”
Alameda will also be closing down, as announced by Bankman-Fried.
The Bahamian government then proceeded in freezing the assets of FTX Digitial Markets, a sub-company of FTX Trading. Securities Commission of the Bahamas revoked the business license of the subsidiary.
SBF no longer as CEO and FTX files for bankruptcy.
Bankman Fried stepped down from his position as CEO after FTX declared bankruptcy and Alameda went bankrupt. Ray took control of the company and began sorting out the wreckage.
Despite tweeting that FTX.US had been hacked on November 10, “100% liquid,” Bankman-Fried tweeted bankruptcy news on November 11 that included both FTX as well as its US counterpart.
“I’m piecing together all of the details, but I was shocked to see things unravel the way they did earlier this week,” Bankman-Fried wrote.
Adam Yedidia – a software engineering at FTX – who appeared at Bankman Fried’s trial less that a year following the original tweet – smashed his ex boss’s excuse of ignorance.
“FTX defrauded all of its customers,” Yedidia spoke on the witness stand.
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