The downfall of FTX happened rapidly following the watchdog journalism from the cryptocurrency news site CoinDesk, which published an article on Nov. 2 that uncovered disturbing connections between Sam Bankman-Fried’s FTX crypto exchange and Alameda Research, the cryptocurrency trading firm also founded by Bankman-Fried. CoinDesk unveiled Alameda’s financial balance sheet recorded its largest asset to be roughly $5 billion worth of FTT, the token native to FTX that gives holders a discount on trading fees on its marketplace.
The revelation prompted Changpeng Zhao, the CEO of rival crypto exchange Binance, to announce Nov. 6 on Twitter that he would sell all of Binance’s holdings in FTT. The public then lost faith in FTX, withdrawing about $6 billion in funds from FTX to send the company — which was valued at $32 billion — into a liquidity crisis.
Binance announced Nov. 8 that it reached a nonbinding agreement to buy FTX’s non-U.S. businesses but announced Nov. 9 that it had backed out of the bailout deal. “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” read a statement from Binance. The Wall Street Journal reported on Nov. 9 that the Securities and Exchange Commission and Justice Department are investigating FTX. On Nov. 11, FTX, FTX.US, Alameda Research, and more than 100 affiliates filed for bankruptcy in Delaware.
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“I didn’t ever try to commit fraud on anyone. I was excited about the prospects of FTX a month ago. I saw it as a thriving, growing business,” Bankman-Fried said from the Bahamas on Nov. 30 in a remote video interview during the New York Times DealBook Summit. “What I was nervous about was that basically – and this started, I would say Nov. 2 or so when there was the leak of the Alameda balance sheet…
