With the trial of disgraced FTX founder Sam Bankman-Fried set to begin next week, ‘SBF’ could join the ranks of notorious hucksters Charles Ponzi and Bernie Madoff if convicted. But neither Ponzi nor Madoff ever operated on such a large scale.
The crypto exchange that Bankman-Fried co-founded in 2019 was worth a whopping $32 billion at its peak, and his personal fortune was once estimated at $16 billion — before it all collapsed. These stratospheric figures make his upcoming trial one of the most closely watched in the history of financial crime. (He still claims he’s innocent.)
But how did this once-acclaimed prodigy with a prominent background end up before a jury of his peers? It all started at Stanford.
How it started
1992: Sam Bankman-Fried was born in Santa Clara County, California, on the campus of Stanford University. Parents Joseph Bankman and Barbara Fried were both professors at Stanford Law School. His father, Bankman, is a clinical psychologist and lawyer, specializing in tax law. His mother, Fried, focused on the intersection of law, economics and philosophy, according to her biography on the Stanford Law School website.
2010–2014: Bankman-Fried attends MIT, the Massachusetts Institute of Technology, in 2010 after tossing a coin to decide between Cal Tech and Cal Tech. He majored in physics in college and minored in mathematics. Despite his natural intelligence, SBF was less interested in his classes than in hanging out with his friends in the Epsilon Theta fraternity, which at one point included several future FTX employees, including co-founder Gary Wang. SBF reportedly held all-night gaming sessions where he enjoyed solving puzzles with limited time.
2014: Shortly after graduating, SBF got a job at the financial firm Jane Street on Wall Street, where he interned. SBF was reportedly interested in the company because of its friends in the effective altruism movement (which advocates trying to help the most people in the most effective way). Several Jane Street employees later joined FTX, including the future CEO of SBF’s crypto trading firm Alameda Research, Caroline Ellison, and the future president of FTX US, Brett Harrison. The company specialized in arbitrage, or taking advantage of subtle price differences in the marketplace, which would later become Alameda’s bread and butter.
2017: SBF approaches Wang to ask him to help set up crypto trading firm Alameda Research while he works as a software engineer at Google. The company originally had $55 million under management, coming from employees and loans from wealthy crypto investors New York Times.
2019: FTX was co-founded thanks to Alameda Research. While Alameda was still deploying its arbitrage strategies in the broader crypto markets, competition intensified and SBF saw FTX as a way to bring in revenue that could help fund Alameda’s trading. The exchange and its founders moved from Hong Kong, where Alameda was based, to the Bahamas. The company soon created FTT, its own cryptocurrency that generated revenue for FTX, but over which Alameda had a large stake and influence. SBF and its employees, including Wang, lived in a luxury apartment complex in Nassau called the Albany. A $40 million waterfront penthouse served as a base for FTX. Employees lived and worked communally.
2022: FTX advertises. The now infamous Super Bowl commercial featuring Larry David aired in February to kick off the sports involvement. In April, FTX signed a 19-year, $135 million deal with Miami-Dade County to embellish its name in the Miami Heat’s home arena. The company struck a deal with Major League Baseball in June that allowed umpires to wear the company’s logo on their uniforms. And in September the company started working with Formula 1 team Mercedes.
How are you
November 2, 2022: A report from CoinDesk shows that FTX and Alameda Research are more intertwined than publicly disclosed. CoinDesk reported that Alameda’s largest asset was FTT, the cryptocurrency issued by its sister company, raising concerns about its viability.
November 6, 2022: In response to the CoinDesk report, Binance CEO Changpeng “CZ” Zhao says he will offload all FTT shares from his exchange, which amounted to $580 million. “We have been supportive before, but we will not pretend to make love after a divorce…” CZ wrote a tweet at the time.
November 8, 2022: CZ and Binance sign a letter of intent to buy FTX, and SBF claims in a tweet that customer funds would be protected as part of the deal. The price of FTX’s FTT token quickly drops by 80%.
November 9, 2022: The Wall Street Journal reports that Zhao and Binance have withdrawn from the deal to acquire FTX, with the company saying in a statement that “issues are beyond our control or ability to assist.” The company was left with a $6 billion hole on its balance sheet. Before approaching Binance, SBF was reportedly turned down for more funding by Silicon Valley and Wall Street billionaires and denied help by rival crypto exchanges such as Coinbase and OKX. Reuters reported that the Securities and Exchange Commission had been investigating FTX’s dealings with customer funds for months.
November 10, 2022: A Bahamian regulator freezes FTX’s assets, and says it is aware that certain assets have been “mishandled, mismanaged and/or transferred to Alameda Research.” The California Department of Financial Protection and Innovation is the first to announce an investigation into FTX.
November 11, 2022: FTX, Alameda, FTX US and other related entities will file for Chapter 11 bankruptcy on November 11 and SBF will step down as CEO. He will be replaced by John J. Ray III, a veteran restructuring attorney who once oversaw the liquidation of bankrupt energy company Enron. In a Twitter statement, SBF expressed its regret: “Once again, I am very sorry that we ended up here. Hopefully things can find a way to recover.”
November 12, 2022: The Wall Street Journal reports that senior executives at FTX and Alameda knew that FTX had loaned client money to the trading firm to help cover bad investments. Alameda CEO Caroline Ellison reportedly said in a video meeting that she, as well as SBF and FTX executives Nishad Singh and Gary Wang, were aware of the decision to commingle funds.
November 16, 2022: Lawmakers call on SBF to testify before Congress. House Financial Services Committee Chairman Maxine Waters (D-Calif.) said in a statement at the time that “The fall of FTX caused enormous damage to more than a million users, many of whom were ordinary people who invested their hard-earned savings in the FTX cryptocurrency exchange, only to see it all disappear in seconds.”
November 30, 2022: Bankman-Fried will speak virtually at the New York Times‘s DealBook Summit and claims some responsibility for FTX’s collapse. He claims that he had been honest in his statements about FTX and that although his lawyers did not approve of him giving the interview, he “…had a duty to talk and explain what happened.” He claimed he had never committed fraud.
December 9, 2022: SBF said a message on Xformerly Twitter, that he would testify before the House Committee on Financial Services on December 13, although he said: “…there is a limit to what I can say, and I will not be as helpful as I’d like.”
December 12, 2022: On the day before SBF is due to testify before members of the House of Representatives, he is arrested in the Bahamas. The FTX co-founder is accused of counts including fraud and conspiracy, according to an indictment from the U.S. Attorney’s Office for the Southern District of New York. The same day, the SEC accuses Bankman-Fried of defrauding investors in FTX Trading Ltd.
December 21, 2023: SBF is extradited to the US from the Bahamas and the US Attorney for the Southern District of New York announces Ellison and Wang’s guilty pleas.
December 22, 2023: A New York judge granted SBF $250 million bail, which he paid in part thanks to his parents putting up their Palo Alto home as collateral.
January 3, 2023: SBF pleads not guilty in a New York court.
February 14, 2023: The judge overseeing SBF’s case orders him to stop using a VPN (virtual private network) to obscure his Internet browsing after he allegedly used one to watch the Super Bowl.
August 11, 2023: Bankman-Fried is sent to a New York jail after a federal judge revokes his bail. The 31-year-old was under house arrest at his parents’ home in Palo Alto, but was accused by prosecutors of interfering with witnesses.
August 22, 2023: Lawyers for SBF claim in court documents that the prison he is being held in, the overcrowded Metropolitan Detention Center in Brooklyn, is not accommodating his vegan diet and not allowing him access to his prescription for Adderall. “He now literally lives on bread and water, which are the only things he gets that he can eat, and sometimes peanut butter,” said attorney Mark Cohen.
September 12, 2023: Bankman-Fried has been denied parole before his trial, which will take place in early October. The federal judge overseeing his case says SBF should remain in custody because he had more than seven months to prepare for it and had “extensive access” to electronic materials relevant to his case.