The extremely anticipated felony trial for Sam Bankman-Fried, former CEO of bankrupt crypto change FTX, begins Tuesday to find out whether or not he’s responsible of seven counts of fraud and conspiracy.
The 31-year-old co-founded FTX in 2019; inside a number of years the as soon as third-largest crypto change’s valuation hit $32 billion at its peak. It’s now making an attempt to claw again any funds to distribute to collectors.
But how did the as soon as third-largest crypto change get right here?
Before FTX, Bankman-Fried co-founded crypto-trading agency Alameda Research in 2017. He co-founded FTX in 2019 as a complement to Alameda, to assist usher in income and liquidity for the buying and selling arm.
Within two years, over 80 buyers supplied about $2 billion in capital to FTX, serving to Bankman-Fried propel his imaginative and prescient right into a actuality. In January 2022, the corporate raised $400 million in a Series C spherical, boosting its valuation to $32 billion. That was its final spherical of public funding.
The firm gained considerably mainstream recognition with branding offers and partnerships. For instance, in 2021 it purchased the naming rights for the Miami Heat’s residence area. FTX additionally received its title branded on Major League Baseball umpires’ polos, and it partnered with celebrities like Tom Brady and his ex-wife, Gisele Bündchen, in addition to Steph Curry, Shaquille O’Neal and Naomi Osaka, amongst others. He additionally had shut ties to U.S. regulators and authorities officers, lots of whom he donated to.
Bankman-Fried was even in comparison with Warren Buffet and lots of known as him the white horse of crypto (Ztoog by no means did, for what it’s price).
But in early November 2022, that each one modified.
FTX’s collapse
Concerns surrounding FTX’s liquidity grew after CoinDesk revealed a duplicate of Alameda’s stability sheet, exhibiting the agency held $14.6 billion in property and $8 billion in liabilities as of June 30, 2022.
But there was an issue: The report confirmed Alameda’s largest asset was $3.66 billion of “unlocked FTT” and $2.16 billion of “FTT collateral.” FTT was the token behind FTX.
The stability sheet confirmed that the $5.82 billion in FTT tokens that Alameda owned was 193% increased than the whole FTT market cap, which was about $3 billion on the time. That means it presupposed to have extra FTT tokens on its stability sheet than what existed on this planet.
Around the identical time it was uncovered, the world’s largest crypto change, Binance, began pulling out its remaining $2.1 billion equal of money in BUSD and FTT. (It had an fairness place in FTX from 2019 to 2021.) This basically triggered a financial institution run on FTX.
FTX and Alameda filed for Chapter 11 chapter within the U.S. mid-November 2022. Bankman-Fried resigned, and John J. Ray III, the Enron turnaround veteran, was appointed its new CEO.
Bankman-Fried, nonetheless, maintained his innocence. At The New York Times’ DealBook Summit, he appeared just about from the Bahamas, saying “I didn’t ever try to commit fraud on anyone; I was shocked by what happened this month.” In a printed DM change with a Vox reporter, he stated he regretted submitting for chapter and thought that “regulators make everything worse.”
SBF arrested
Bankman-Fried was arrested in December 2022 within the Bahamas, the place FTX was based mostly. He was then extradited to the U.S. to face a lot of felony expenses. He was launched on a $250 million bail bond, and he remained underneath home arrest at his dad and mom’ residence in Palo Alto. This was revoked in August after he was accused of intimidating Alameda’s former CEO, Caroline Ellison, by leaking her personal diary.
Ray represented the corporate throughout a House Financial Services Committee listening to concerning FTX. When requested whether or not the agency had important danger administration methods, Ray stated on the time that “there were virtually no internal controls and no separateness whatsoever” and added that he did not “trust a single piece of paper” within the change’s group. U.S. Attorney Damian Williams known as Bankman-Fried’s alleged crimes “one of the biggest financial frauds in American history,” in a press convention.
The aftermath
FTX co-founder and former CTO Gary Wang, and Alameda Research’s former CEO, Caroline Ellison, each pleaded responsible in December 2022 to federal felony expenses in relation to the FTX collapse. They’re additionally dealing with civil penalties from the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) alongside the felony expenses. Wang and Ellison plan to cooperate with prosecutors and might be main witnesses within the trial, given their shut ties to Bankman-Fried, FTX and Alameda.
In January, Bankman-Fried pleaded not responsible to all counts, which embody wire fraud, conspiracy to commit cash laundering, and conspiracy to misuse buyer funds. He might withstand 115 years in jail if convicted on all expenses.
The crypto trade as an entire suffered from FTX’s collapse, which was the primary of many. BlockFi filed for Chapter 11 in November 2022, as did Genesis Global Trading in January.
Where we’re immediately
Bankman-Fried might be represented by Cohen & Gresser, and Mark Cohen, a high-profile protection lawyer and former federal prosecutor, would be the lead lawyer. If that title sounds acquainted, it may be as a result of he additionally represented Ghislaine Maxwell in her intercourse trafficking trial associated to Jeffrey Epstein. He requested an early launch for Bankman-Fried however was denied.
On Tuesday, we’ll begin to see how FTX’s story ends. But what’s on our thoughts is what occurs to the buyers and collectors affected by the collapse? And what occurs to the billions in crypto property tied up in authorized proceedings?