On the morning of November 8, Sam Bankman-Fried, the founder and CEO of FTX and Alameda Research, a hedge fund that also deals in cryptocurrency trading, was a billionaire.
He was one of the richest men in the world.
The 30-year-old former trader was an institutional figure in the crypto space, known by the initials “SBF”. He was just the king of the fledgling blockchain-based financial services industry. Bankman-Fried was a god in the crypto sphere. .
It gained this enormous power by rescuing and acquiring crypto firms weakened by the credit crunch caused by the bankruptcy of its sister cryptocurrency Luna and UST on May 9.
Bankman-Fried was able to expand his influence to the point where more than a hundred crypto companies and projects are associated with him or one of his firms – FTX, Alameda, FTX Ventures and FTX US.
Excluding Bankman-Fried and His Inner Circle
But on the evening of November 8, his entire empire collapsed when SBF FTX announced that it was seeking emergency help from its rival, Binance CEO Changpeng Zhao, as it faced a liquidity crisis.
The agreement between the two men was subject to due diligence. The next day, Zhao refused SBF and FTX. On November 11, Bankman-Fried filed for bankruptcy and resigned as CEO. He was replaced by John Wray, the liquidator of disgraced energy broker Enron. Still worth about $16 billion as of the morning of November 8, SBF’s fortune is now valued at zero.
Even now, it is certain that the deposed king will get nothing back from liquidating the assets of his kingdom. Ray told the Delaware bankruptcy court that. If his partners and close friends also invested in FTX, they will not get anything, nor will their relatives.
“Within the authority requested by this petition, no amount shall be paid to the following persons or to any person known by the debtors to be related to Samuel Bankman-Fried, Gary Wang, Nishad Singh or Caroline Ellison.” the liquidator said in the court application.
Gary Wang was the co-founder and Chief Technology Officer of FTX. Nishad Singh was the director of engineering and Ellison was the CEO of Alameda Research. Their activities were suspended on November 18.
This is consistent with a statement the former trader himself made on November 10, the day before the bankruptcy filing, that clients and investors would be prioritized.
“Every penny of this and the existing pledge will go directly to users unless or until we do right by them,” Bankman-Fried tweeted. “After that, investors, old and new, and employees who fought for what was right for their careers and didn’t take responsibility for it,” fell through.
Bankman-Fried received a $1 billion personal loan from Alameda, according to Ray. The firm also provided $543 million in personal loans to Nishad Singh and $55 million to Ryan Salame, CEO of FTX Digital Markets, an affiliate of FTX.
“I understand that for some of these transactions there is no loan documentation and that certain real estate is recorded in the Bahamas records in the personal name of these employees and consultants,” the liquidator said.
FTX’s bankruptcy was due to a lack of liquidity when customers tried to withdraw funds from the platform. The shortfall appears to be the result of FTX’s founder transferring $10 billion in client funds from FTX to Alameda Research.
Bankman-Fried is still at large. Despite FTX’s top 50 lenders demanding $3 billion from the exchange and millions of retail investors never getting their investments back, no charges have been brought against it.
As a cryptocurrency, FTX fulfilled orders for its clients, received their cash and bought cryptocurrency on their behalf. FTX acted as a custodian, holding customers’ cryptocurrencies.
FTX then used it to borrow or market its clients’ cryptocurrencies through its sister company’s trading arm, Alameda Research. Borrowed cash FTX was used to bail out other cryptocurrency organizations in the summer of 2022.
At the same time, FTX used the cryptocurrency FTT, which it issued as collateral on its balance sheet. This was a significant exposure due to the concentration risk and variability of the FTT.