In just a few years since founding the crypto exchange FTX in 2019, Sam Bankman-Fried built a reverent audience among the US political and financial establishment.
Then it all came crashing down.
Often dressed like he’d just come from a pick-up squash game, the 30-year-old onetime crypto billionaire had appeared with the likes of Bill Clinton and the Davos elite, evangelizing about the future of crypto.
FTX represented a new kind of exchange that promised a safe and efficient way for traders to make transactions around various cryptocurrencies. That vision and its customer growth drew investments from top VCs like Sequoia Capital, Tiger Global, and SoftBank, helping the company quickly reach a stunning $32 billion valuation. Bankman-Fried’s own worth was once pegged at around $20 billion, according to Bloomberg.
With some $8 billion in customer funds seemingly gone, financial regulators alleged that what happened at FTX wasn’t some novel and complex financial engineering, but a simple and daring fraud scheme along with straightforward mismanagement.
Bankman-Fried, with the obliging support of his lieutenants, sent FTX customer funds to his other company Alameda Research, which allegedly squandered that bounty on risky investments and also served as his “personal piggy bank,” according to the US Securities and Exchange Commission.
Federal prosecutors in Manhattan also ensnared Bankman-Fried, with what turned out to be the cooperation of his ex-girlfriend and former Alameda CEO Caroline Ellison and former FTX co-founder Gary Wang. All three have been hit with serious criminal charges for fraud and conspiracy.
Bankman-Fried’s project was also about cultivating a sense of legitimacy and ethics around the theoretically lucrative and practically unsupervised scheme that is crypto. He was the rare CEO in the industry who actively courted regulation amid the mainstreaming of a shadowy economy where lack of oversight had been central to its appeal.
He cemented himself as a generous donor to mostly Democratic candidates. Celebrities like Larry David and Gisele Bündchen flocked to his cause, fueling the hype in ads including a now-mortifying Superbowl commercial that’s become a subject of an ongoing lawsuit by investors.
Bankman-Fried’s downfall and the implosion of FTX happened so fast that you might have missed some of the saga’s most eyebrow-raising details. We’ve woven them all together so you can catch up on some of the key figures in the story of FTX’s downfall, the head-spinning investigations, and the litany of charges so far:
Sam Bankman-Fried
An MIT physics graduate who napped on beanbag chairs in the FTX office, played video games at pitch meetings, and whose work uniform consisted of sneakers paired with calf-high white socks and seemingly straight-from-the-dryer T-shirts, Bankman-Fried projected a dowdy aesthetic that seemed to define a new kind of tech billionaire.
He also promoted the image of a demanding and all-consuming work environment at his companies, claiming even toward the end that his problem may have been working just 13 hours a day, down from a normal 18 hours.
His venture in the Bahamas later drew attention for the people running it and their relationships with one another, with Coindesk reporting that a “gang of kids” were behind the enterprise.
In the weeks before his arrest, he’d made multiple media rounds — bewildering observers and perhaps his own lawyers at the time — to explain his version of events, which boiled down to acknowledging that his companies didn’t have the internal oversight investors believed it did.
He’d even planned to testify before a House panel, but was arrested in the Bahamas the night before the hearing.
Barbara Fried and Joseph Bankman are both Stanford Law Professors whose house in Palo Alto is both a refuge for their son who is currently out on a $250 million bail, and a security for that amount, which they didn’t have to actually pay. It means that if he flees, they could lose the house and potentially be on the hook for a portion of that multi-million dollar sum.
Regulators have also alleged that his parents may have benefited from the scheme, though they aren’t named as defendants. “Bankman-Fried also used commingled funds from Alameda to make large political donations and to purchase tens of millions of dollars in Bahamian real estate for himself, his parents, and other FTX executives,” the SEC said in its complaint.
Caroline Ellison
The daughter of MIT professors, Ellison was known from a young age as a math genius, and met Bankman-Fried at the trading company Jane Street. Bankman-Fried has said they once dated.
Now hit with 7 criminal charges, Ellison has pleaded guilty and expressed contrition before the New York federal court presiding over the criminal cases involving Bankman-Fried. As Alameda’s head, Ellison allegedly helped the company borrow “billions of dollars,” using FTX’s illusory FTT token as leverage, the SEC has alleged.
Gary Wang
Regulators have similarly accused Wang, who has also separately pleaded guilty to his own criminal charges, of facilitating the scheme that sent FTX funds to Alameda. They claimed he helped make the code that created that channel to drain FTX funds, and that he took $200,000 of company money “for his own purposes.”
John J. Ray III
John J. Ray III had choice words about FTX when he took over as CEO in order to steer its surprise bankruptcy filing in November. The restructuring expert, known for helping maximize recoveries for creditors of collapsed firms like Enron, told a Delaware bankruptcy court that there was a virtually unprecedented “complete failure of corporate controls” at FTX.
FTX filed for Chapter 11 restructuring in Delaware in November, after fellow cryptocurrency exchange Binance dropped out of a plan to potentially take it over. The filing set a series of events in motion for Bankman-Fried’s dramatic capture in the Bahamas.
As US investigators closed in, FTX’s current CEO Ray described a company with few if any internal protocols around basic accounting and management. He said, for instance, that employee expenses would sometimes be approved with emojis, and that the company used the accounting tool Quickbooks, an odd choice for a large company.
But Bankman-Fried continued to keep a public profile, pitching himself as an open book willing to discuss FTX’s collapse and the blunders that led to it.
In a whirlwind week in December, Bankman-Fried was arrested in the Bahamas, held in custody in Fox Hill prison there, and extradited to New York.
