Sam Bankman-Fried’s $32 billion FTX empire is now bankrupt, sending markets crumbling — and the saga is far from over.

Ever since FTX failed to withstand a $6 billion bank run last week, the once mighty brand has gone down as one of the worst catastrophes in digital asset history.

But it was only six days ago that Binance CEO Changpeng Zhao had announced a plan to acquire FTX, a deal which would’ve seen the world’s top crypto exchange absorb its primary rival. 

The timeline below tracks major events leading up to the FTX group filing for bankruptcy last Friday, along with more than 130 subsidiaries and adjacent businesses including trading unit Alameda Research.

Nov. 9 — Wednesday: From bad to worse

FTX sister firm Alameda Research’s website goes offline reading: “This site is currently private” as it halts trading with at least one regular counterparty, a Blockworks source says.

The Securities and Exchange Commission as well as the Commodity and Futures Trading Commission begin investigating whether FTX mishandled customer funds.

Rival exchange Binance walks back plans to acquire FTX following its “due diligence,” which determines the $8 billion balance sheet black hole isn’t worth it.

Nov. 10 — Thursday: FTX hunts for capital

Bankman-Fried, still FTX CEO, vows to plow ahead in search of outside liquidity to plug his leaking ship. He pledges “radical transparency” and a desire to make his customers whole.

He simultaneously announces Alameda is winding down operations on FTX. Later, Bankman-Fried tells his staff in a memo that he is seeking a capital rescue package worth some $9.4 billion from the likes of Tron’s Justin Sun and stablecoin issuer Tether, Reuters reported.

Tether freezes $46 million USDT held by FTX on the Tron blockchain following a request from law enforcement. Trading activity causes the stablecoin’s dollar peg to wobble while chief technology officer Paolo Ardoino says cash redemptions are flowing smoothly.

Only FTX users in Bahamas allowed to withdraw

After FTX suspended digital asset withdrawals on Tuesday, on-chain data shows the exchange on Thursday processing some $7.2 million in requests by those residing in The Bahamas, where the firm is headquartered. 

The restrictions on non-Bahamas users leads to some smuggling capital out via peculiar NFT sales. 

Bankman-Fried claims allowing Bahamas residents to withdraw while barring the rest of the world was in line with regulator requests. The Securities Commission of the Bahamas later denies that was the case.

The Wall Street Journal reports that Bankman-Fried tells staff during an investor note that Alameda owes FTX about $10 billion, apparently customer funds.

The Securities Commission of The Bahamas freezes FTX’s assets forcing local subsidiary FTX Digital Markets into what’s known as provisional liquidation. Its permit to operate in the Caribbean nation is terminated.

The US-regulated arm of FTX, FTX.US, says it could end up halting trading despite Bankman-Fried assuring customers the US entity is not financially impacted by “this shitshow.”

Nov. 11 — Friday: SBF resigns, FTX goes bankrupt

FTX and dozens of affiliated companies are declared bankrupt and seek chapter 11 protection in the federal court of Delaware. Bankman-Fried resigns.

International exchange FTX, FTX.US and Alameda are placed in the hands of veteran insolvency practitioner John J. Ray III, who replaces Bankman-Fried as FTX CEO. Ray handled Enron in the wake of its own bankruptcy reorganization.

With roughly 100,000 creditors, Bankman-Fried apologizes for the second time in a tweet thread saying he was still “piecing together” details and would provide a play-by-play update soon.

Nov. 12 — Saturday: FTX hacked for most of its remaining crypto

Blockchain analytics unit Elliptic reports $477 million in various tokens was stolen from FTX’s operational wallets on Saturday morning. FTX insiders seem to have saved $186 million from the attackers by moving the crypto into cold storage.

FTX insiders then share a message on Telegram: “FTX has been hacked, all funds seem to be gone. FTX apps are malware. Delete them. Chat is open. Don’t go on FTX site as it might download Trojans.”

FTX.US general counsel later confirms that unauthorized transactions took place. The firm is now coordinating with law enforcement. Kraken chief security officer says the company knows the identity of the assailant, as transaction fees for some of the illicit transactions were funded from a Kraken account.

“Over $220 million of the tokens have been swapped for ETH or DAI through decentralized exchanges – a common tactic used by thieves seeking to avoid seizure of the stolen assets,” Elliptic wrote.

More details of FTX balance sheet emerge

Financial Times reports that just before FTX went bankrupt, the exchange’s primary balance sheet showed only $900 million in liquid, easy-to-sell assets against $9 billion in liabilities.

Of those liquid funds, Robinhood stock made up $470 million controlled by a Bankman-Fried entity not listed in the Friday bankruptcy filing. FTX also held $5.5 billion in “less liquid” crypto assets and $3.2 billion in illiquid equities.

Bankman-Fried bought a 7.6% stake in Robinhood in May and reportedly sought to offload the stock at around 20% discount on its current market value last week, at $9 per share (HOOD trades at $10 per share during pre-market Monday).

The second-biggest liquid asset on FTX Trading’s balance sheet was $200 million cash kept with Alameda-owned investment firm Ledger Prime, with no other US dollar balances. Notably, no bitcoin assets were listed despite maintaining $1.4 billion in bitcoin liabilities.

Nov. 13 — Sunday: Bahamian police investigate FTX

Bahamian authorities say they’ve begun working with the nation’s securities regulator to investigate potential criminal misconduct. 

Reuters had reported on Saturday that Bankman-Fried previously sent $10 billion in customer funds from FTX to Alameda, with between $1 billion and $2 billion now totally missing.

The outlet, citing sources familiar, alleged Bankman-Fried built a backdoor that allowed him to siphon funds from FTX without setting off in-built alarms.

Bankman-Fried later said he “disagreed with the characterization” of the multi-billion dollar transfer and blamed a “confusing internal labeling” which was misread without elaborating on the details, per the report.

Sam Bankman-Fried, Alameda, FTX, FTX.US did not immediately respond to requests for comment. Bankman-Fried responded to Reuters’ questions about the missing funds with “???”.

Given the market had yet to fully recover from the turbulent upheavals triggered by Terra, Three Arrows, Celsius and Voyager, FTX going bankrupt will fuel greater doubt, Bo Bai, executive chair at Singapore-compliant crypto exchange MetaComp told Blockworks.

“FTX’s demise will undoubtedly set off greater scrutiny, especially around transparency in the sector,” The revelations surrounding Alameda’s portfolio are yet another reminder that while the industry is a place for innovation, fundamental rules of risk management still apply.”

David Canellis contributed reporting.

(By Sebastian Sinclair)

https://blockworks.co/news/ftx-bankrupt-hacked-investigated-a-timeline-of-events/