Here is a quick overview of the FTX story, focusing on events that are not in dispute.
Two-sentence summary
There was a run on FTX who paused withdrawals halfway while they raised emergency cash, but then they declared bankruptcy. Suspicion arose about whether the crisis had been caused by a conflict of interest between FTX and one of its customers and ultimately five executives were convicted of fraud and/or conspiracy.
Longer version
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Sam and his former roommate Gary Wang started FTX International (henceforth “FTX”) in 2019. FTX was a cryptocurrency FuTures eXchange—a platform where customers could trade with and borrow from one another with a focus on a particular kind of asset known as “futures”. FTX was the world’s second-largest crypto exchange, valued at $32 billion. Its primary regulator was The Bahamas; FTX US was a separate entity serving US customers.
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One of FTX’s customers was a hedge fund called Alameda Research that was majority-owned by Sam and, as of 2021, run by Sam’s on-off girlfriend Caroline Ellison. As was publicly known at the time, Alameda also acted as one of FTX’s “market makers”, agreeing to buy from and sell to other customers when no other customer wanted to take the other side of a trade.
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All three companies collapsed in November 2022. A competitor had spooked their customer base who then rushed to withdraw their funds; $5 billion of withdrawals was processed over three days. Sam began to liquidate assets and solicit cash injections of up to $8 billion from investors to cover what was initially regarded as a mere liquidity crisis. But on November 10th, Sam was persuaded to hand partial control of the companies to lawyers who in the midst of the crisis had, unbeknownst to Sam, reported reconciliation concerns to US authorities. The lawyers filed all three companies for bankruptcy in the US the following day and took full control of the entities. Within a week, they announced that one of their five objectives with the bankruptcy plan was investigating Sam and his colleagues.
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In December 2022, the CFTC stated that the remaining $8 billion of customer funds would never be recovered and US prosecutors charged Sam with fraud and conspiracy. He was arrested the day before he was set to testify before Congress, extradited to the US, and remanded to prison in August 2023 for alleged witness tampering.
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Caroline, Gary, and two other FTX executives Nishad Singh and Ryan Salame pleaded guilty to various counts of fraud and conspiracy. Caroline, Gary, and Nishad accepted plea bargains and testified against Sam in his October 2023 trial at which he was found guilty. Sam has since been sentenced to 25 years’ imprisonment, Ryan has been sentenced to 7.5 years, and the other three await sentencing. Sam is appealing his convictions and sentence.
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In August 2024, it was announced that customers will be repaid $12.7 billion out of the $16 billion the bankruptcy lawyers have made liquidating the companies’ remaining assets.
Almost all related court filings are public. The court docket for the criminal proceedings, for example, includes Sam’s trial transcripts, character references, and sentencing transcript, as well as plea hearing transcripts for Caroline, Gary, Nishad, and Ryan. Sam’s appellate brief is accessible via the docket for the appeal. You may also be interested in parts of the court docket for the bankruptcy proceedings.