The entire timeline of the FTX saga
As you may already know FTX and the FTT token have crashed quite significantly over the past week. With many stories and conflicting narratives, it may be confusing how it got to this point.
Disclaimer: Any information in this post is not financial advice and is intended for educational purposes.
credit: DALL-E-2
The beginning
Alameda Research is founded in November 2017 by Sam Bankman-Fried (SBF) and friends. Which was supposed to be a quantitative trading firm some sort like a hedge fund. By carrying out trades, and matching buyers and sellers. They promised annualized fixed returns at 15% which was quite a good deal at that time.
FTX is founded and rapidly expands
May 2019 SBF and Gary Wang found the crypto exchange FTX over the past 2 years the exchange had grown to one of the largest exchanges acquiring other crypto entities such as Blockfolio. They had also managed to raise $900+ Million in funding from Blackrock, Softbank, Sequoia Capital and others raising its valuation to $32 Billion.
FTX had launched FTX ventures with $2 Billion funding in January 2022, continuing its expansion by acquiring competing crypto entities such as BlockFi and Voyager digital.
The cracks start to form
Unbeknownst to FTX users, $10 Billion in funds had been transferred from FTX to Alameda research, which was used to invest in its own endeavors. Since the code was controlled by SBF and a few others it codes easily be moved around without anyone noticing according to a former employee.
SBF had continued to syphon $4 billion worth of funds from FTX via FTT tokens to Alameda research, which had continuing losses. People had grown suspicious however SBF had managed to lie his way out of the situation.
Since the coin used by FTX and Alameda, FTT was controlled by the same group of people it could be printed out of thin air with no regulation. Note that the majority of Alameda’s net equity was with the FTT token. This wasn’t an issue for SBF and others as many users were not aware of this.
However, on November 2, 2022, CoinDesk was able to obtain financial records showing Alameda research had stored $14.6 Billion of FTXs token FTT. Eventually the decline of FTT had caused Alameda to lose its liquidity.
FTT dump
On November 6th FTX competitor Binance who held $2.1 Billion worth of FTT tokens had dumped them onto the market.
Many FTX users had confirmed their suspicions of the alameda FTT holdings and began to withdraw their funds in large numbers to the tune of $6 billion withdrawn within 72 hours. Causing a crash in the FTT token of around 80%. Afterwards leaving FTX with $9 Billon in liability with only $900 million worth of liquidity.
Binance had offered and withdrawn from acquiring FTX after the books showed a significant gap between assets and liabilities of around $8 billion.
The ending
FTX had blocked withdrawals from its platform as it was no longer able to process them. Both Alameda and FTX had filed for bankruptcy. The ripple effect had caused the crypto market to lose approximately $200 billion in a few days.
1–2$ Billion of the funds of the customers had gone missing and couldn’t be accounted for, furthermore, the exchange was “hacked” losing $600 million of customer funds.
Total liabilities of FTX are approximately double of Enron at around $50 Billion.
Credit: FTX & Alameda research affiliated entitles Via The Block
As the story continues to update, I’ll add any relevant information.
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Very well written post, thanks for sharing.