"The former king Xiao Shuai has a genius girlfriend Xiao Mei. 320 days ago, they built and destroyed a crypto empire worth $32 billion with their own hands."
FTX, once a crypto giant, hit an iceberg last November.
The collision triggered a tsunami that not only swamped ships in the same sea area, but also dragged down a number of related companies, and in turn affected the entire crypto continent.
To this day, the aftermath of the FTX case has not subsided - its scattered wooden fragments still pierce the skin of every crypto person like a thorn - reinforcing the impression of regulators on the risks of crypto finance, advising investors not to take chances with the risks of centralized operations, and constantly warning industry insiders who retain memories of the pain of "the next FTX failure."
As one of the biggest fraud cases in financial history, the progress of FTX's case has been slow (just because I am in the drama and I am tired of following it). Odaily Planet Daily will first briefly review the latest developments in the past 10 days and predict the important nodes in the next 10 days:
On September 16, SBF (Sam Bankman-Fried, founder/former CEO of FTX) saved an unpublished 15,000-word article on the X platform, which included "I may never be able to turn my lifelong influence into a positive one, but the fact is that I did what I thought was right." In addition, the article contained information related to SBF's personal relationship with former Alameda CEO Caroline Ellison, and pointed out that Ellison rejected SBF's request to stop Alameda's trading hedging, resulting in SBF sending a message with "the most mean words ever said to her."
On September 17, FTX (under takeover CEO John Ray III) said it had unfrozen all affected accounts and claimants could reapply on the platform.
On September 22, a U.S. judge barred SBF’s proposed witnesses from testifying in the October trial. FTX sued SBF’s parents to recover “misappropriated funds.”
In court documents and on social media, SBF has repeatedly criticized law firm Sullivan & Cromwell for using it as a scapegoat for FTX’s collapse while downplaying its own relationship with the exchange.
FTX Reminder: September 29th is the deadline for customers to submit claims.
On September 25, O'Neill and other former FTX spokespersons filed a motion to dismiss the class action lawsuit.
On September 26, several lawyers interviewed by CoinDesk said that considering the severity of the crime and the estimated losses, SBF could spend about 10 to 20 years in prison if convicted. However, Judge Kaplan has broad discretion and the final verdict will be based on his opinion.
CoinDesk disclosed the SBF’s October trial process, which is scheduled to begin on October 3 and is expected to take 6 weeks.
Just this morning, BBC released a documentary about FTX founder SBF, “Panorama · Downfall of the Crypto King”. The editorial department of Odaily Planet Daily has already watched it first, and we will spoil the spoilers. Through this 90-minute documentary, we will take everyone to review the past and learn new things, dig out the unknown details, and profile the changes in people’s positions.
The spring breeze is full of vigor and the horse's hooves are galloping
Sleeping only 5 hours a night, living with 10 roommates in The Bahamas, worth $22 billion at the age of 29 but planning to donate it all to charity, driving a Toyota Corolla because "I don't really need a Lamborghini"... this is SBF, who was recently famous, captured by NAS Daily.
Since when did SBF begin to attract people's attention?
In 2019, he founded the crypto exchange FTX and quickly used high-profile marketing strategies to promote his ideas and ideals to the world.
With the recommendation of many social media influencers, FTX is regarded as the most user-friendly crypto "stock exchange" and "as safe as a bank". Many KOLs and Youtubers on FTX platforms teach people how to "become a millionaire without doing anything".
Not long after, FTX crossed over to collaborate with a group of top cultural and sports stars, and its advertisements began to enter the mainstream vision.
“If you don’t believe in crypto, you’re missing out.” That’s what’s flooding the online spaces where young people hang out (a familiar FOMO recipe).
Offline, many parties were held in the Bahamas, and big-name DJs were invited. Young FTX users said, "This is cool. Anyway, they are a company that can change the world and have money to burn."
Under the guidance of such optimism and media, FTX quickly attracted users from more than 100 countries. The "safe" entry posture of many new users is: register - buy some FTT (FTX's platform currency) - sell at a high point - exchange back to their own country's legal currency, and use this to strengthen their wealth dreams in the bull market.
During the most excited period, there were whistleblowers who tried to warn of the risks - "The crypto industry is full of money laundering and fraud." In the documentary, the horse-riding "Brother M" has been warning people: "Crypto is a wild world, full of poisonous snakes, and it continues to attract cowboys... My mission is to find those bad guys."
But such voices were drowned out by even louder waves.
FTX user "S" claims that he does a lot of research before investing. Normally, when investing or participating in a company, people will ask a lot of questions: who are you, what are your strengths, and who will support you. But no one asks these questions to a genius with a background in Stanford and MIT.
A well-known story is that SBF was having a video conference with investors while playing games at the same time. This should have been a bad sign, but it left Sequoia Capital, BlackRock and others with the impression of "Wait, who is this kid? A genius?"
(Note: FTX has raised a total of US$1.8 billion, and the list of investors includes but is not limited to Sequoia Capital, Temasek Holdings, SoftBank Vision Fund, Ontario Teachers’ Pension Plan, Tiger Global Management, etc. In January 2022, FTX announced the completion of a US$400 million Series C financing, and the company’s valuation rose to US$32 billion. This is the last round of financing announced by FTX and the pinnacle of its valuation.)
SBF had a happy childhood. His parents taught at Stanford (law professors). He was good at mathematics since he was a child. He went from the gifted school to MIT to study physics and mathematics. Just like the stereotype of nerds, he loves video games very much.
After FTX was established, the company culture was to play games in spare time, shoot TikTok short videos, and occasionally sleep in the office and work overtime, which fully captured the atmosphere of the young people of the era.
Other key members of the company include:
"Rumored girlfriend" Caroline Ellison, a Harry Potter fanatic, has a "complicated relationship" with SBF. After SBF claimed that he would focus on FTX for a better "public welfare", she took over Alameda Research (a crypto market maker/hedge fund/investment institution founded by SBF) and became CEO;
The mysterious Asian co-founder and CTO Gary Wang, for details, please see "FTX theft mystery: Who is the mysterious CTO Gary Wang?";
Anthony Scaramucci, a former business partner of FTX (more famously known as the founder of Skybridge Capital), once bought a large amount of FTT (in early 2022, FTX also bought 30% of SkyBridge Capital’s shares). He is considered SBF’s spiritual mentor and played a significant role in FTX’s fundraising journey in the Middle East and North America. He later invested in the new crypto company of Brett Harrison, former president of FTX US…
While winning over young people, SBF has not relaxed his "other image" to attract endorsements from old money. Not only has he appeared on the cover of Forbes, he has represented the crypto industry in the US Congress to discuss regulation, and he is also the second largest funder behind Biden's presidential campaign (donating $40 million to the Democratic Party in the 2022 midterm elections).
It was this character who, in less than 2 weeks, fell into the abyss and was labeled as "the worst scammer".
10 dramatic days in crypto history
On November 2, 2022, Alameda Research stated that it was completely independent from FTT (related financial business), which aroused suspicion.
On the 6th, Binance CEO CZ claimed that he would "dump" FTT, which quickly triggered FUD.
“Everyone was selling at the time, everyone was running away, and they also told people around them to withdraw their coins quickly.”
Perceptions are extremely important in the financial markets, and Caroline and SBF took turns speaking out, calming emotions and trying hard to prove that "we are fine."
On the 7th, a death spiral of "withdrawal-panic-bank run" formed.
SBF called its partners and said it was just a liquidity issue. A few hours later, a second call came in, saying, "The problem is more serious than what I just said."
Afterwards, the former employee representatives who were interviewed had also heard some rumors about FTX risks in advance, but they just laughed it off and did not take it seriously. When they were really faced with the "unable to withdraw cash" page, everyone was stunned.
At that time, some insiders also pinned their hopes on "selling to Binance." (Note from Odaily Planet Daily: CZ once proposed to consider acquiring FTX, but later canceled it.) For this reason, a crypto KOL expressed his opinion: "CZ has lit a fire for his biggest competitor, and the rest is left to the market."
On the 9th, many people came to give SBF advice on "what to do now", and Anthony also flew to the Bahamas to try to save the situation. However, the FTX Empire, which was seriously short of funds, "was just filling the gaps between several subsidiaries."
On the 10th, SBF began to apologize on social media, and FTX US applied for impeachment of SBF.
On the 11th, FTX collapsed completely.
“No one lost everything faster than he did.”
People push the wall
In front of the camera, an investor said that he put 2.1 million US dollars for housing and children's education into FTX.
Several other FTX users also “calmly” recounted their trust in FTX and the betrayal they ultimately faced.
The victims then transferred their anger, blaming social media and high-profile celebrities for "manipulating investors' thinking and influencing my investment decisions" and "can the millions of endorsement fees be refunded? Return my hard-earned money."
However, when the topic came to "Why didn't anyone discover it in advance", they became vague and blamed each other.
Some media said that FTX’s fraudulent behavior is very classic, which can be summarized as “misappropriating customer funds for its own use.”
As the investigation progressed, documents pointed out that "Alameda Research was not audited", and even the phrase "such is life" appeared in the report. Another piece of evidence showed that three years ago, FTX paid $3.3 million to someone who reported FTX fraud and money laundering to bribe him to keep silent.
The politicians and celebrities that FTX once spent a lot of money to win over have cut ties with it. A Republican representative denied the source of some campaign donations and said that FTX also provided the same amount of support to the Libertarian Party.
On December 12, 2022, SBF was arrested by the Bahamian police. A crypto KOL said in a live broadcast: "The two happiest moments in my life are losing my virginity and SBF being arrested."
What followed was a long and repetitive process of investigation, reorganization, case filing, extradition of relevant executives, wrangling with affiliated companies, applying to seal the diary of "closest friend" Caroline (so that it would not be used as evidence in the criminal trial), temporary release, apologies and indignation...
Behind the complicated facts lies the complexity of human nature.
When the camera turned to the residents of the Bahamas, some gave different comments.
An uncle who wrote a song about the FTX incident said that (FTX) has indeed improved the quality of life for local children in terms of public welfare. Some reporters also commented that apart from the failures in management, SBF is a "modern Robin Hood."
However, more charitable organizations said that they had not received donations from FTX, and speculated that "perhaps the order of funding is ranked according to how much reputation it can bring to FTX."
Regardless of the evaluation, the fact is that there is still $1.7 billion in user funds that have not been recovered.
What if I do a lot of good things but break a few small rules?
In an interview after the incident (BBC gave a close-up of his shaking legs), SBF repeatedly emphasized that he did not consider himself a fraudster, would do his best to compensate the victims, and denied the existence of a backdoor between FTX and Alameda. (Odaily Planet Daily Note: However, on September 12 this year, court documents confirmed that the Alameda account had special permissions on FTX and one of the accounts would not be liquidated.)
In January this year, SBF lacked confidence and avoided eye contact during an interview. His smile, like that of a child who had done something wrong, even became a meme in the community.
Crypto video blogger Tiffany Fong had never interviewed a celebrity of this level before the FTX incident.
During SBF's brief stay at home awaiting trial, Tiffany visited SBF's parents in California. The house was fenced, and SBF was wearing an electronic anklet. SBF occasionally played chess with reporters who came to interview him, but spent more time "feeling lonely" - playing Sudoku in prison and watching Netflix's animated series "Inside Job" when he returned home.
After talking about those sins and responsibilities, Tiffany even had a little doubt, could SBF be innocent?
In August this year, SBF was asked to ban the Witnesses.
As mentioned at the beginning of the article, October will see the most important trial in the FTX case.
As for the entire crypto industry, today, regulators are still trying to find ways to comply with regulations, and a large number of professionals are working hard to do so. Some people also believe that Crypto is like the snake in the Garden of Eden, tempting people to commit original sin, and FTX is just the tip of the iceberg of sin that has emerged above the surface of the sea.
✏️Disclaimer: This article is for reference only, DYOR
📄Source: Alpha Investment Research, Hao Fangzhou
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