FTX's Collapse: A Timeline of Events and Implications

The Rise of FTX

FTX, a cryptocurrency exchange, was founded in May 2019 by Sam Bankman-Fried, a former Wall Street trader, and Gary Wang, an ex-Google employee. Quickly gaining prominence, FTX secured a $900 million funding round in July 2021, valuing the company at $18 billion. By October 2021, further investments had increased its valuation to $25 billion. The company established notable partnerships, including a sponsorship deal with Mercedes' Formula 1 team and naming rights for the Miami Heat's home court.

Expansion and Strategic Moves

In 2022, FTX continued its aggressive expansion strategy. Its U.S. arm was valued at $8 billion after raising $400 million in January. FTX also signed deals with distressed crypto firms, such as BlockFi and Voyager Digital, while facing regulatory scrutiny over claims about government insurance for company funds.

Unraveling and Bankruptcy

The downfall began in November 2022 when a leaked balance sheet revealed the financial interdependence between FTX and Alameda Research. Binance announced plans to liquidate its holdings of FTX's native token, FTT, leading to a cascade of events that culminated in FTX's announcement of Chapter 11 bankruptcy on November 11. Bankman-Fried resigned as CEO amid reports of missing customer funds.

Legal and Financial Repercussions

In response to the collapse, regulatory bodies in the Bahamas and the U.S. launched investigations. FTX's bankruptcy filings disclosed a severe liquidity crisis affecting potentially over a million creditors. Legal actions ensued, with investors alleging violations of state laws, and major crypto players like Genesis Global Capital suspended operations due to FTX's failure.

Investor Landscape

FTX attracted investments from high-profile entities and individuals over the years, including SoftBank, Temasek, and celebrities like Tom Brady and Gisele Bundchen. Despite its rapid ascent, the collapse has sent shockwaves through the cryptocurrency industry, prompting a reevaluation of investment strategies in digital assets.