In three years alone, Sam Bankman-Fried has managed to make FTX the third largest cryptocurrency exchange company in the world with a value of thirty two billion dollars. Then it failed miserably in ten drama nights through November 2022. What came next was what was, arguably, one of the major moments of financial and legal cases in the history of modernity – one that changed the whole cryptocurrency market and its regulatory future forever.
How FTX Began
Sam Bankman-Fried was the founder of FTX, started in May 2019, and this was preceded by the creation of another quantitative trading firm, Alameda Research, which became the focus of the entire collapse of the exchange.
A Meteoric Rise
As of January 2022 FTX was worth thirty two billion dollars and had attracted close to two billion dollars in capital investment by leading venture capital firms such as during the “Multi Pitch” Sequoia Capital, Tiger Global, and SoftBank Group all around the world.
The Celebrity Factor
With big name sports and entertainment icons on its side, FTX was assisted in creating exceptional mainstream awareness and consumer confidence that had catapulted the platform way beyond the reach of its traditional crypto currency investor bases on the global stage.
The CoinDesk Article
November 2 CoinDesk reported that a big part of the balance sheet of the Alameda Research was made up of FTT – the token of their own exchange, which raised urgent and acute liquidity issues.
The Bank Run Begins
After the news of the CoinDesk report customers took a wave of withdrawals at the same time. FTX was left with an eight billion dollar disparity between the amount owed to its customers and the amount that the exchange could immediately pay.
Binance Walked Away
Binance first accepted to purchase FTX in order to resolve the liquidity crisis but reversed their decision the next day after looking through internal information that indicated possible wrong treatment of the money of customers in the framework of the whole platform.
Bankruptcy in Ten Days
FTX has filed Chapter 11 bankruptcy protection on November 11 2022. Bankman-Fried relinquished the CEO post and John Ray III, the restructuring specialist in charge of Enron during its bankruptcy process, was brought in to replace him.
The Legal Process Begins
December 12 2022, Bankman-Fried was arrested in the Bahamas and transferred to the United States where he pursued seven criminal charges of wire fraud, securities fraud and money laundering related crimes.
Convicted on All Charges
A federal jury declared Bankman-Fried guilty of all seven criminal charges on November 2 2023, after a trial at which former FTX executives who had accepted plea deals with federal prosecutors also gave testimony.
Twenty Five Year Sentence
A federal judge ruled on March 28 2024 that bankmanfried would serve twenty five years in prison, the first legal precedent of its kind to make a very loud statement on accountability and standards in a cryptocurrency sector that has been marked by lawlessness to date.
