In the world of cryptocurrency, where fortunes rise and fall like digital tides, the story of Sam Bankman-Fried and FTX is a gripping tale of ambition, controversy, and a spectacular downfall.

Unconventional Beginnings

In the world of digital currencies, crypto king Sam Bankman-Fried was a serious player. In 2017, he co-founded Alameda Research, a crypto trading firm that would later take the industry by storm. However, Bankman-Fried’s bright idea, and ultimately his undoing, was to create a crypto exchange in 2019. He birthed FTX, an exchange that was intended to fuel Alameda's activities. As if founding the two wasn't enough, he assumed the role of CEO for both entities and held the title until 2021.

FTX and Alameda's Relationship

The relationship between FTX and Alameda raised eyebrows across the cryptocurrency industry. The mingling of Alameda and FTX gave birth to potential conflicts of interest. Alameda, once FTX's largest trader, brought liquidity to the exchange, but the closeness of the two entities drew sharp scrutiny. Between 1 June 2022 and 22 July 2022, Alameda's known wallets accounted for the largest stablecoin deposits and sources of liquidity to all of FTX's known wallet addresses, accounting for 10% of Tether transfers and 30% of USD Coin transfers on the exchange. Speculation was rife about Alameda's "secret exemption" from FTX's auto-liquidation protocol, further fueling the intrigue.

The Great FTX Unraveling

The downfall began with Alameda suffering a cascade of losses in May and June 2022, with FTX reportedly lending over half of its customer funds to the firm. This ill-advised move, in stark violation of FTX's own terms of service, was described by Sam Bankman-Fried as a 'poor judgment call' in a serious understatement. On 12 November 2022, The Wall Street Journal reported that anonymous sources had said that Alameda CEO Caroline Ellison said that she, Bankman-Fried, Gary Wang, and Nishad Singh were aware of that decision. Worse still, FTX used software to cloak the misappropriation of these customer assets, igniting a firestorm of controversy.

Binance's Bombshell and FTX's Plummeting Fortunes

Things only got worse following Binance's revelation on November 7, 2022, of its intention to divest its FTT holdings. This bombshell, coupled with FTT's languishing trading volume and the simmering feud between CEO Zhao Changpeng and Bankman-Fried, sent FTT's value into a nosedive. Binance claimed that this abrupt move was caused by "recent revelations", but would say no more at the time. It was a blow that reverberated across the entire crypto landscape, resulting in a massive exodus of $6 billion from FTX, leaving it unable to meet the clamor for withdrawals.

A Desperate Bid to Save a Sinking Ship

In a last-ditch effort to rescue the company, FTX and Sam Bankman-Fried turned to Binance for salvation, seeking an acquisition . Still, on November 9, Bloomberg declared the acquisition "unlikely" due to FTX's precarious financial state. Regulatory watchdogs like the U.S. SEC and CFTC began sniffing around FTX's operations, further eroding hopes. Soon after, Binance declared it was aborting the FTX acquisition due to FTX's purported mishandling of customer funds and things got very personal. All this has caused some in the industry to question Binance’s role in FTX’s collapse.

The Trainwreck, or FTX’s Final Days

FTX's website froze withdrawals on November 9, and the firm, despite boasting assets greater in value than their customer deposits, found itself strapped for cash. Desperate pleas for $10 billion in emergency financing ensued. The crisis engulfed Alameda Research, with the revelation that Alameda owed FTX a staggering $10 billion, funds originally meant for trading. As chaos reigned, assets like the naming rights to FTX Arena – the home of Miami Heat - went up for sale, while internal conflicts and resignations fractured the company's leadership.

Bankruptcy, Scandals, and Unanswered Questions

The cataclysmic journey ended with FTX, FTX US, and Alameda Research declaring bankruptcy on November 11, 2022. The turmoil left an estimated $8 billion in debts, and the fallout reached international shores as regulators in the Bahamas and Japan stepped in. Unanswered questions persisted about the whereabouts of a substantial chunk of customer funds, rendering FTX's balance sheet a tale of financial recklessness.

“Unauthorized Transactions”

As FTX plunged further into chaos, a shocking $473 million vanished in what FTX US termed "unauthorized transactions." Funds primarily in stablecoins like Tether were swiftly converted to Ether, a classic crypto thief maneuver. The resulting chaos left many unanswered questions, with blame cast on “an ex-employee” or malware.

And, all this leads us up to today, where Sam Bankman-Fried has been found guilty of a variety of money laundering and fraud and faces a potential 110 years in prison.