Weeks ago, FTX was a $32 billion cryptocurrency darling. Now it's in bankruptcy.
Larry David, Tom Brady and Stephen Curry are among the celebrities who endorsed the cryptocurrency exchange. Now they all face a lawsuit over their involvement.
Concerns of financial instability at FTX -- a top platform where users buy and sell crypto -- triggered a wave of customer withdrawals totaling billions of dollars. But FTX lacked sufficient funds to pay sellers, instead imposing a halt on withdrawals altogether.
Some crypto traders, who deposited their savings on the platform, may never get their money back.
Attention has centered on Sam Bankman-Fried, CEO of FTX, a 30-year-old crypto wunderkind who for years garnered goodwill as a philanthropist and leading proponent of industry regulation.
Lately, however, he has faced withering questions over the mismanagement of billions in customer funds.
The fall of FTX is one of the most sudden and massive in recent corporate history.
Below is a timeline of the series of events that explains exactly how FTX fell so far and so fast.
How FTX fell: A timeline
Nov. 2 – The collapse of FTX centers in part on the cryptocurrency exchange's close relationship with Alameda Research, a crypto hedge fund also founded by Bankman-Fried.
Major concerns about FTX started when news outlet CoinDesk published an article that found a significant portion of Alameda Research's assets consisted of FTT, a token created by FTX that allows users of the exchange to access discounted trading fees.
Because FTT cannot be easily exchanged for cash, the report stoked fears about the capital reserves at Alameda Research and thus FTX.
Nov. 6 – In response to the article, Changpeng Zhao, the CEO of rival crypto exchange Binance, often referred to as "CZ," said he would sell all of the company's holdings in FTT, which amount to $580 million worth of the token.
The major exit from a crypto heavyweight triggered a wider selloff, akin to a bank run, placing immense pressure on FTX to meet the sudden demand for customer withdrawals. Due to a lack of funds, FTX halted customer withdrawals altogether.
Nov. 8 – FTX reached a deal to sell itself to Binance, the crypto exchange whose executive had helped trigger the selloff.
"This is a user-centric development that benefits the entire industry," Bankman-Fried said. "CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world."
"The important thing is that customers are protected," he added.
Nov. 9 – Binance withdrew from the deal to acquire FTX.
"As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com.," Binance said.
Zhao, of Binance, summed up the decision in a tweet:
Meanwhile, the Securities and Exchange Commission and the Justice Department had begun investigating the FTX collapse, the Wall Street Journal reports.
Sequoia Capital, a top venture firm, wrote down its roughly $210 million stake in FTX to $0.
"We are in the business of taking risks," Sequoia Capital said in a public letter. "Some investments will surprise to the upside, and some to the downside."
Nov. 10 – A Bahamian financial regulator froze the assets of FTX.
The Securities Commission of the Bahamas said it was aware of public statements suggesting that FTX's customer funds were potentially "mishandled" and "mismanaged."
In this May 11, 2021, file photo, Sam Bankman-Fried, co-founder and chief executive officer of FTX, is shown in Hong Kong.
Bloomberg via Getty Images, FILE
Nov. 11 – FTX filed for Chapter 11 bankruptcy protections as it assesses the value of its remaining assets, a company announcement said.
Bankman-Fried resigned as CEO and was replaced with John J. Ray III, who steered disgraced energy company Enron through bankruptcy proceedings in the 2000s.
"The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders," Ray said.
Nov. 12 – The Wall Street Journal reported that FTX lent customer deposits to Alameda Research to help it meet its liabilities, and top executives at Alameda Research were aware of it, raising further scrutiny about the relationship between Alameda Research and FTX.
Nov. 14 – The collapse of cryptocurrency exchange FTX became the subject of an investigation by federal prosecutors in New York, sources familiar with the matter told ABC News.
At issue, the sources said, is whether FTX violated securities laws when it reportedly gave customer funds to Alameda Research.
Nov. 16 – House lawmakers called on Bankman-Fried as well as executives at Alameda and Binance to testify in a hearing on Capitol Hill in December.
"The fall of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds," Rep. Maxine Waters, D-Calif., said in a statement.
"Unfortunately, this event is just one out of many examples of cryptocurrency platforms that have collapsed just this past year."
Meanwhile, celebrity boosters of FTX -- including Naomi Osaka, Shaquille O'Neal and Kevin O'Leary -- were sued in federal court in a class-action lawsuit alleging that false representations of a deceptive product were used to dupe vulnerable investors.
"I had no knowledge, nor did any of the other celebrities, of what occurred here," O'Leary, an entrepreneur and panelist on the TV show "Shark Tank," told ABC's "Nightline."
Later in the day, Vox published an interview in which Bankman-Fried disparages regulators using an expletive, confesses that his previous calls for tighter crypto regulation had been driven by public relations concerns and says he regrets the company declaring bankruptcy.
Bankman-Fried, a prolific philanthropist, in the interview described his public commitment to ethics as "a dumb game we woke westerners play."
Nov. 17 – John Ray, the incoming CEO who was installed to guide the company through bankruptcy proceedings, said in a court filing that he has never seen such a "complete failure" of corporate controls in his career, including during the Enron scandal.
"From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals," Ray said.
"This situation is unprecedented," he added.
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