The former FTX executive was convicted of fraud and money laundering on November 2, 2023. Exactly a year earlier, the article that would lead to the downfall of FTX was published. A look back at an eventful year full of revelations.
On November 2, 2022, the media CoinDesk specializing in cryptocurrencies published an article which would change the face of the entire industry. The article showed, for the first time, that the finances of Alameda Research, an investment fund created by Sam Bankman-Fried and sister company of the FTX exchange platform, were not as stable as they appeared. looked.
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On November 2, 2023, Sam Bankman-Fried was found guilty by a New York jury on 7 counts, including fraud, criminal conspiracy and money laundering. In one year, Sam Bankman-Fried, nicknamed SBF, went from being a young prodigy and savior of cryptos to that of a criminal, guilty of one of the largest financial scams in recent years. On March 28, 2024, he was sentenced to 25 years in prison, forever tarnishing the portrait of a misunderstood genius that he had tried to build for himself. A look back at this milestone year, and the extraordinary fall of FTX and its founder, Sam Bankman-Fried.
The beginning of the troubles
November 2, 2022
The CoinDesk article creates an earthquake in the crypto industry. Alameda Research and FTX were previously considered reliable and secure companies. The CoinDesk article uncovers the fact that a significant portion of Alameda's funds were actually FTT, a digital currency created and distributed by FTX. This discovery casts doubt on the true valuation of this asset, and therefore, on all the financing of the two companies.
During the days that followed, the situation deteriorated. On November 6, Binance, the world's largest cryptocurrency exchange and FTX's biggest rival, announced that it plans to sell all FTT it owns. The price of the cryptocurrency collapses a little more, and Binance's announcement pushes many FTX customers to withdraw their money from the platform: withdrawal requests reach the equivalent of 6 billion dollars in 3 days .
In order to calm the situation, Sam Bankman-Fried published a message on Twitter, which remained in the minds of many observers, in which he explained that a rival was trying to attack FTX with false rumors. “ FTX is fine, assets are fine »: FTX is doing well, funds are doing well.
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November 8, 2022
Binance, after having crushed FTX, positions itself as a potential savior. Changpeng Zhao (or CZ), the boss of the platform, explains having made an offer to buy FTX – the latter would have “ called for help » her rival. For a brief moment, the situation seemed to be under control.
On November 9, 2022, these illusions are shattered: Binance announces in a tweet retract. “ Following due diligence, as well as reports of mismanagement of client funds and investigations by US agencies, we have decided not to pursue the potential acquisition of FTX. » Sam Bankman-Fried deletes tweet in which he said FTX was doing well.
November 11, 2022
Nine days after the article was published and as many days of suffering, FTX filed for bankruptcy. SBF resigns as CEO. The news is an explosion in the crypto world, already shaken a few months earlier by another spectacular bankruptcy, that of Terra. The entire sector is affected by the fall of FTX: the price of bitcoin falls to its lowest level in two years, thousands of customers have their funds frozen, and many companies, to which FTX owed money, are closing. find themselves in difficulty.
At this point, everyone still thinks FTX has “ only » been the victim of bank run, too many withdrawals from customers. Things will change soon.
The day after the bankruptcy, November 12, 2022, SBF was questioned by the police in the Bahamas, where FTX is legally established. On November 17, John J. Ray, who took over as head of FTX to manage the bankruptcy filing, declared that he has never seen in his career ” such a complete failure of corporate controls and such a complete absence of reliable financial information “.
SBF is summoned in December 2022 by the American financial policeman in order to explain the situation.
December 12, 2022
SBF was arrested in the Bahamas on December 12, 2022 by Bahamian police, the day before his hearing before the US Congress. He was extradited to the United States, where he was indicted by a New York court for “ wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering “. The myth that SBF had built for itself, that of a young crypto prodigy who had “simply” made some management errors with FTX, is starting to crumble.
The investigation and trial
January 2023
Once extradited to the United States, he is allowed to remain free, in his parents' home in California, on bail of $250 million. He is also prohibited from contacting his former FTX associates without his lawyers. On January 3, he pleaded not guilty to all charges.
The complaint against Sam Bankman-Fried, and the ensuing investigation, reveal a completely different personality than the one the entrepreneur had cultivated in recent years. It is revealed that there were many more problems with FTX: it was no longer just a question of mismanagement of funds, but rather the theft of users' money.
August 2023
SBF is still noted for his personality. While he was placed under house arrest with his parents, prohibited from connecting to certain websites and playing games. League of Legends, it quickly becomes clear that he is not at all respecting the conditions of his release. He would have used a VPN to watch a football match, and would have, according to The Vergetransmitted to the New York Times from the pages of the diary of his former partner, Caroline Ellison.
The latter, who is the former general manager of Alameda Research, pleaded guilty and agreed to cooperate with the courts during the investigation ahead of the trial, and she must testify against SBF at the trial. Sam Bankman-Fried was returned to prison in August.
October 2023
The trial opens on October 3, 2023, in a New York court. SBF is alone in the dock: the other former executives of FTX and Alameda Research have all pleaded guilty and agreed to cooperate in the investigation. The evidence they present against the exchange's former CEO is absolutely damning.
Not only would SBF have been aware of the liquidity problems of FTX and Alameda, but it would also have actively participated in trying to disguise the accounts to reassure investors and customers. He also reportedly directly asked Gary Wang, former CTO of FTX, to code a “backdoor”. This piece of code allowed Alameda to draw on the exchange's customer funds in order to stay afloat. At the time of FTX's collapse, Alameda owed the platform $8 billion.
When it came time to defend himself, the former leader dug in even deeper. Unable to respond to the evidence against him, SBF and his lawyers tried to cling to his image as a prodigy, having made mistakes in a high-risk market. But, by answering alongside the lawyers' questions, saying that he doesn't didn't remember »or by contradicting oneself, SBF dug his own grave.
November 2, 2023
After 4 weeks of trial, and 4 hours of deliberation by the jury, SBF was found guilty of all counts brought against him. Exactly one year to the day after the publication of the CoinDesk article and the start of FTX's downfall, the former executive faces up to 110 years in prison.
March 2024
The final verdict is known on March 28, 2024: Sam Bankman-Fried receives 25 years in prison. A relatively lenient punishment: if his lawyers asked for 6 years, estimating that the victims could certainly be reimbursed in full for their losses, the New York prosecutor asked for a sentence of between 50 and 60 years. SBF would face a maximum of 110 years in prison. “ The punishment must be adapted to the seriousness of the crime “, explained the judge who handed down the sentence, “ and it is a very serious crime “.
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