The final days of the FTX crypto empire – The full story

In less than a week during the month of November 2022, Sam Bankman-Fried (SBF)’s giant crypto platform FTX went bankrupt. The company and its founder were already so well known that Hollywood is in a race to film the story of its demise. Many Americans will have to wait for his trial set to begin later this year to hear all details, but financial newspapers like the Wall Street Journal and the Financial Times were able to do better. Based on testimonials and emails, they recorded the last days and hours of FTX.

It’s a hell of a ride that shows how a group of millennials brought down a $40 billion company in just a few hours.

7 November 2022

SBF instructs its traders to sell their positions as soon as possible as his company needs cash. A story had appeared in the crypto press that weekend showing how the link between Alameda, the Hong Kong-based trading company run by his ex Caroline Ellison, and FTX, the crypto platform, worked and how both were backed by the underlying asset of FTT, the cryptocurrency of FTX.

There was a rumor that Changpeng Zhao, the CEO of rival crypto platform Binance, wanted to sell $500 million worth of FTT coins if the story was true.

An email from SBF to his traders reads: “ETA on getting at least $2b of USD?”

As FTT’s value begins to fall, two groups are forming within the company. The first group (in the Bahamas) is based around Sam and believes that the company can be saved if they can find cash quickly. The second group sits around the company’s lawyers in New York and believes that protection from creditors should already be considered.

8 November 2022

The next morning Lennix Lai, a big boss of crypto platform OKX in Hong Kong, receives a call from Sam in the Bahamas. He explained that the market was panicking and therefore asked if OKX could ‘help him out a little’.

Lai said he would speak to management and asked Sam to call back. When Sam called back two hours later he said FTX needed “a couple billion” dollars immediately to avoid “very serious consequences”. Delay would cause the hole to grow to between $4bn and $8bn.

Lai said that sum was too large and recommended that Sam call ChangPeng Zhao, CEO of Binance. According to Lai, that was the only one who had the necessary funds.

After some hesitation and more calls to banks and funds, Sam finally sent a string of “increasingly desperate” messages to his arch-rival.

When he reached out to me, I thought he was going to ask for a private deal to buy the FTT tokens… But when he called me, he very quickly alluded that they’re in big trouble, and they’re looking for a buyout, CZ later explained during a crypto conference. I knew he was desperate.

Binance gave its agreement to review FTX’s accounting and the market calmed down for a while after rumor of a possible deal spread. But all alarm bells went off with the staff of FTX.

Soon, news of FTX’s troubles was spreading on the small island nation. Rental car agencies in Nassau demanded their vehicles back, afraid that they wouldn’t get paid. Hotels and landlords turned out FTX employees, some of whom moved into properties owned by the company. Many workers rushed to book flights off the island. “If you could get a flight out tomorrow, you would go,” one said anonymously.

According to another source, FTX staff were being searched at the airport by Bahamas police already, so colleagues started throwing out any article of clothing imprinted with the company’s FTX logo.

It was this combination of a real, physical hurricane and a psychological hurricane, a former FTX employee explained It was the most crazy, hectic 24 hours of my life. I felt like my worldview was falling apart. FTX was not just a job for me and for other people. FTX was my life.

As the New York group realizes the seriousness of the situation and attempts to send money to law firm Sullivan & Cromwell to protect themselves from arrest, the Bahamas government begins to realize that it is possible that a multi-billion dollar company could go out of business on their territory. If that happens it will have very big consequences as many people in the Bahamas work directly or indirectly for FTX.

A deputy finance minister, Christina Rolle, was appointed to oversee the crypto business. She sends a very urgent e-mail to SBF, which reads:

Good morning… Please advise your availability to meet with the Securities Commission of The Bahamas to discuss recent press regarding liquidity issues as well as the potential acquisition of FTX by Binance…

Over in Hong Kong, Caroline Ellisson informs her staff that Alameda will probably have to go bankrupt. Caroline, a Harry Potter superfan who used to have a relationship with Sam, already knows that she will have to speak to a lawyer. A few weeks later, she decides to cooperate with the American judiciary to get a reduced sentence. She makes a ‘plea deal’ and tells all the details about Sam Bankman-Fried and the trades of FTX and Alameda to the FBI.

9 November 2022

After Binance’s financial analysts review FTX’s accounts, Changpeng Zhao decides not to go through with the purchase.

These messages are sent between SBF and CZ.

• SBF: Hey, we are still extremely excited to work on this with you guys. We are obviously seeing a lot of public pieces coming out claiming leaks, but we obviously don’t know if that’s real. We would love to get clarity from you guys on this, and we are willing to do anything to make this work
• CZ: Sam, we won’t be able to continue this deal. Way too many issues. CZ

A few hours later, Binance sends out a press release and the value of FTT collapses completely

10 November 2022

The lawyers in New York realize that FTX and Alameda are worth nothing and that many billions of customer funds have disappeared. They try to convince Sam to leave the company to a judge or a law firm that can settle the bankruptcy, but Sam refuses.

When speaking to Sam in a video chat, he is accompanied by his father, a law professor at Stanford University, and his personal attorney. At that moment, the Bankman-Fried family realizes that arrest is imminent.

12 December 2022

Sam tries to stay out of court for another month. After learning that the Bahamas will arrest him, he tries to re-open the FTX website for withdrawals and transfers to bank accounts, but only for customers with accounts in the Bahamas. It turns out not to work and the police arrest him on December 12 in the Bahamas. The United States immediately requests his extradition.

The trial against Sam will normally start on October 2, 2023.