FTX files Chapter 11; Sam Bankman-Fried arrested seventeen days later

NOV 11 2022 · 12:10

Video: Crypto Market Live Updates | Crypto Exchange FTX Fall | Sam Bankman-Fried News | English News Live Date: 2022-11-11 · Type: failure · Tags: exchange-failure, fraud, sam-bankman-fried, alameda-research, custody, effective-altruism, chapter-11, 2022 Ian Allison's leaked balance sheet was nine pages that ended the most powerful figure in crypto On November 2 2022, CoinDesk published Ian Allison's analysis of a leaked Alameda Research balance sheet showing that the bulk of Alameda's assets were FTT — FTX's own exchange token — not independent collateral. Binance's CZ tweeted his intention to sell his FTT holdings on November 6; a bank run ensued. FTX halted withdrawals on November 8, filed Chapter 11 in the District of Delaware on November 11, and Bankman-Fried was arrested in Nassau on December 12. He was convicted on all seven counts in November 2023 and sentenced to 25 years. The FTX collapse was the logical endpoint of the posture Sam Bankman-Fried had cultivated: effective altruism as brand management, regulatory engagement as competitive moat, and customer funds as proprietary capital. The full customer asset commingling — Alameda drawing on FTX deposits to cover trading losses and make political donations — was not discovered all at once but assembled forensically by the new CEO, restructuring specialist John J. Ray III (who had handled Enron), who filed documents describing the record-keeping as the worst he had seen in decades of professional practice. The political aftershocks were durable. Bankman-Fried had been the second-largest individual donor to Democratic campaigns in the 2022 cycle; the collapse arrived one week before the midterm elections. Customer recoveries, enabled by the post-2022 price recovery, eventually approached or exceeded 100 cents on the dollar in nominal terms — a fact that framed the punishment debate and that prosecutors and defense attorneys have continued to invoke. Facts • CoinDesk Allison article: November 2 2022 • FTX withdrawal halt: November 8 2022 • Chapter 11 filing: November 11 2022, District of Delaware • SBF arrested: December 12 2022, Nassau, Bahamas • Conviction: November 2 2023, seven counts (wire fraud, conspiracy, campaign finance violations) • Sentence: March 28 2024, 25 years federal prison • Caroline Ellison sentence: September 24 2024, 24 months • Customer recovery rate: projected ~100% of nominal dollar claims by late 2024 (post-crypto price recovery) Primary Documents • CoinDesk: Divisions in Sam Bankman-Fried's Crypto Empire Blur (Nov 2 2022) — https://www.coindesk.com/business/2022/11/02/divisions-in-sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet/ • DOJ press release: SBF sentencing (March 28 2024) — https://www.justice.gov/usao-sdny/pr/samuel-bankman-fried-sentenced-25-years-orchestrating-multiple-fraudulent-schemes