The decline and fall of FTX has revealed that millions of investors were hoodwinked by the exchange’s CEO, Sam Bankman-Fried (SBF). Though the dust is still settling, now is a good time to look back at the timeline of the events that led us to this point.

FTX and SBF before the collapse

For years SBF had been considered an upstanding entrepreneur as head of FTX. A darling of the industry, FTX scored influencer contracts with the likes of Tom Brady and Steph Curry as well branding contracts with Mercedes F1 and the home of the Miami Heat, “FTX Arena”. 

A believer in effective altruism, a philanthropic philosophy of making a lot of money to help the world is a noble pursuit. Ironically SBF, the poster-child of effective altruism, was engaged in a very ignoble philanthropic goal all along.

Timeline of events 

1. Nov. 2 

   • CoinDesk published a balance sheet from SBF’s research firm. Alameda Research held $14.6 billion in net equity which was buoyed by a stockpile of FTX native FTT tokens – not a third party stable asset such as a fiat currency.

   • In sum, SBF had been selling FTT as an uncollateralized asset and investing the cash elsewhere, such as real estate in the Bahamas.

2. Nov. 6

   • Binance CEO, Changpeng “CZ” Zhao, announces they will be selling all of their FTT holdings.

   • The market reacts by selling off $6 billion worth of FTT. 

3. Nov. 7

   • SBF deleted several possibly incriminating tweets that were captured and posted by The Tie on Twitter. The tweets stated that FTX’s “assets are fine”.

4. Nov. 8

   • FTT market price falls from about $22 to $3.15, causing FTX to collapse. 

   • Binance announces they are actively acquiring FTX outright, pending due diligence.

5. Nov. 9

   • During the due diligence process, Binance announces they are backing out of the deal after reviewing FTX’s books. 

   • Alameda Research’s website goes dark.

6. Nov. 10

   • FTX, headquartered in Nassau, Bahamas, has its assets frozen by Bahamian regulatory authorities.

   • SBF says Alameda Research will wind down operations.

7. Nov. 11

   • FTX files for Chapter 11 bankruptcy protection in the U.S. and SBF resigned as CEO. Insolvency expert John Ray III takes over as CEO of FTX.

   • FTX gets hacked, and loses $600 million in “unauthorized transactions” from cold wallet storage.

   • Speculation arises that the hacker could have been SBF himself or a close associate.

   • Kraken CSO, Nick Percoco, tweets that they “know the identity of the user” and that they are a U.S. citizen – Percoco would not disclose if the user was SBF or anyone else saying, “this is confidential information.”

8. Nov. 12

   • The Financial Times reports that SBF only had $900 million in assets against $9 billion in liabilities.

   • It is reported that SBF and two other associates are detained in the Bahamas while Ms. Ellison was in Hong Kong, possibly attempting to flee to Dubai.

Fallout and path forward

There is a lot to be learned from the downfall of FTX. Investors need to scrutinize investment agencies with a more diligent DYOR (“Do Your Own Research”) approach. SBF went from a net worth of $16 billion to $900 million in less than 24 hours and took countless investors down with him. 

One major takeaway from the FTX scandal is that even the smartest investors are susceptible to the power of branding. Crypto can be highly lucrative, but it is by far the most volatile market. Investors need to fully adopt the maxim of “true ownership” and take responsibility for where they invest and with whom they entrust their resources.