Sam Bankman-Fried

, who founded cryptocurrency exchange FTX in 2019, was considered a shambolic boy genius, and was worth more than US$20 billion at his peak.

Yet in little less than a week, he watched his companies disintegrate into a steaming pile of financial toxic waste. He faces criminal and civil charges in the United States, including money laundering, campaign finance violations and conspiracy to commit wire fraud. He is accused of absconding with billions of dollars of clients’ money. Two of his lieutenants have pleaded guilty to fraud and are expected to testify against him. Bankman-Fried maintains his innocence.

What follows is the most detailed account yet of FTX’s final days. It is based on interviews with people with first-hand knowledge of events, as well as court documents and extensive internal messages and emails, which have been minimally edited for length and clarity. They show how a tiny group of millennial millionaires and lifelong friends panicked and despaired as they ran a US$40-billion company into the ground.

Read the first and third instalments of the saga here

Way too many issues

Email — Nov. 8, 11:37

From: Christina Rolle

To: Sam Bankman-Fried

Good morning … Please advise your availability to meet with the Securities Commission of The Bahamas to discuss recent press regarding liquidity issues as well as the potential acquisition of FTX by Binance …

Email — Nov.. 8, 14:48

From: Sam Bankman-Fried

To: Christina Rolle

Hey! I’m pretty pressed for time but will make sure that we talk to you ASAP; I’ll briefly say that, as of now, no sale has happened or been finalized although there are active talks. We’ll keep you updated about those

Email — Nov. 8, 11:29

From: Ryan Pinder

To: Sam Bankman-Fried

Good morning, I know it must be a hectic time. Is there more information you can share with us regarding the purported (agreement) between FTX and Binance? Ryan

Email — Nov. 8, 16:58

From: Daniel Friedberg

To: Ryan Pinder

Hi Ryan — sorry for the delay. Can Sun (FTX International’s general counsel) is on island and will coordinate.

Dan Friedberg,

FTX’s top lawyer,

opposed a U.S. bankruptcy. The company had already turned off the tap for client withdrawals; other cryptocurrency exchanges had frozen funds for weeks and survived. If it came to it, FTX should file for insolvency overseas. Bankruptcy in the U.S. brought the risks of regulatory scrutiny and the interference of lawyers inexperienced in cryptocurrency. “You have a bunch of people coming in who don’t know the business at all,” one executive said of that scenario. “It’s just going to be a shitshow.”

But by late Tuesday, both Friedberg and

Can Sun, FTX International’s general counsel,

had resigned. Sun emailed colleagues to say he quit. Friedberg seemed to “disappear,” according to colleagues. Sun declined to comment. Friedberg did not reply to requests for comment.

The resignations left Ryne Miller, FTX US’s general counsel, as the senior lawyer for FTX.US and Tim Wilson, who had also worked at S&C earlier in his career, as the remaining attorney for FTX International. “Ryne saw the FTX situation as similar to the Merrill Lynch situation or Lehman in 2009,” said a former colleague. Miller’s former firm had handled Lehman, the largest bankruptcy in U.S. history. Wilson did not respond to requests for comment.

Signal — Nov. 9 10:38

Ryne Miller: We need to bring in a professional manager who will begin making real decisions (supported by input from this group) towards wind down (SullCrom will identify and bring in this person). Binance understands that process needs to start, and in fact it will give them a proper point of contact as wind down proceeds and the “deal” between them and FTX begins to take shape …

Zach Dexter, one of the company’s top U.S. executives, pasted a link to a news story many had already read. It claimed that Binance was going to walk away from the deal because its first look at FTX’s books allegedly showed misappropriation of customer funds. The ensuing message and email exchanges, parts of which were previously reported by the New York Times, show the divisions about how to proceed. Dexter did not respond to requests for comment.

Ryne Miller: Spoke to Binance legal this morning as a diligence kick-off. Was very high-level and they said they would follow-up. I do not have a direct contact there beyond that call.

SBF (reply to Dexter): They hadn’t reached out to us about that, haven’t heard anything from them directly, reaching out

SBF (reply to Miller): On a call, sec

Caroline Ellison: Right now I’m thinking of [communicating to employees] a vibe of ‘Alameda is probably going to wind down, if you don’t want to stay or want to take some time off no pressure, if you do want to help with stuff like making sure our lenders get repaid it’s super appreciated’

Caroline Ellison: Did this … though now I’m kinda worried that everyone is gonna quit/take time off and I’m going to end up trying to unwind all our positions myself

Somebody in the group chat chimed in to ask, “Can we offer some bonus … for people to work through this? I know there’s not a ton of $ but maybe something?” Miller replied:

Ryne Miller: No. We should continue to make payroll as fast as that’s possible. Other expenditures sharply curtailed.

Meanwhile, Bankman-Fried tried to get answers out of CZ (Binance chief executive

Changpeng Zhao)

. A person who saw the messages read them to me over the phone:

Text — Nov. 9

SBF: Hey, we are still extremely excited to work on this with you guys. We are obviously seeing a lot of public pieces coming out claiming leaks, but we obviously don’t know if that’s real. We would love to get clarity from you guys on this, and we are willing to do anything to make this work

CZ: Sam, we won’t be able to continue this deal. Way too many issues. CZ

The collapse of the Binance deal strengthened the case for bankruptcy. Desperate for a legal second opinion to counter Miller and Wilson’s appeals, Bankman-Fried turned to his father, Stanford University professor Joe Bankman, a specialist in tax law who had served as an adviser to his son before and had flown from California to join him in the Bahamas. As the crisis deepened on Wednesday, some FTX executives were blowing the whistle to regulators.

Ryne Miller: Based on what we are learning … and based on advice of Sullivan & Cromwell, our recommendation and instruction (I am GC of FTX US so saying what I can) is to turn off trading and halt activity on both FTX US and FTX.com. And then identify a control/decision person to work with outside counsel on next steps. For US purposes, we will be informing the CFTC, SEC, and Department of Justice that this recommendation has been made.

Bankman-Fried acknowledged the message and relayed a company-wide note he’d just shared.

SBF: Sent this just now, ack on the above: — Hey all, We obviously just saw Binance’s statement; they relayed that first to the media, not to us, and had not previously informed us or expressed those reservations. I’m working, as quickly as I can, on next steps here. I wish I could give you all more clarity than I can. I completely understand if you want to step away, and don’t blame you at all for it. My goals here are: protecting customers, doing what I can for employees and investors. I’ll keep fighting for those, as best I can, as long as it’s correct for me to. I’m exploring all the options. I am deeply sorry that we got into this place, and for my role in it. That’s on me, and me alone, and it sucks, and I’m sorry, not that that makes it any better. Thank you Hi Ryne, I love you but I don’t want to stop trying yet. I appreciate you letting me try everything I can and manage the situation to provide clarities and assurance to our users too. If nothing works I’d be happy to work with you on a proper wind down

Ryne Miller: I understand your perspective, thank you. I am not making public statements. I will report to our US regulators consistent with our obligations.

That afternoon, Miller joined Ryan Salame, chair of the FTX’s Bahamas corporate entity, on a video meeting with the head of the island’s securities regulator, Christina Rolle. According to Rolle’s sworn account, Salame told the authorities that FTX client assets had been transferred to Alameda without their knowledge or consent. This looked to Rolle like a possible crime. She ended the call and phoned the police.

Email — Nov. 9, 08:03

From: Ryan Pinder

To: Sam Bankman-Fried

The Government of The Bahamas would like to ask some questions, and get an update on the current situation. I will be briefing the Prime Minister later today. Can you please assist with a briefing update as well as addressing the following questions…What is the ongoing commitment to The Bahamas? Thank you, Ryan

Email — Nov. 9, 16:16

From: Sam Bankman-Fried

To: Ryan Pinder

Sorry giving updates as I can. Things moving quickly. I can’t give as confident answers as I’d like to all of those (questions). My current only priority is doing right by customers, and doing whatever I can for that; right now that means prioritising, above everything else, getting funding to fill the liquidity gap so that all customers can be made liquid. cc’ing Joe/Constance/Ryan who can give more details. Sam Bankman-Fried

Email – Nov. 9, 18:00

From: Ryan Pinder

To: Sam Bankman-Fried

Thank you Sam. Joe, Constance, Ryan – please provide me with a brief and answers to the questions below so I can provide the Prime Minister an update. Ryan

Email – Nov. 9, 21:27

From: Sam Bankman-Fried

To: Ryan Pinder

Hi all, I’m really sorry about the delayed responses here — it’s been a hectic week but that’s on me. Myself, and Joe (cc’ed), will be responsive going forward. And I’m also deeply sorry for ending up in this position in the first place… Right now we are focused on one thing: making customers whole. We are focusing exclusively on doing that this week… As you saw, Binance did not end up following through on their transaction. However, we are in the middle of a separate process to make users whole; we will know within a week if that comes through… We are deeply grateful for what The Bahamas has done for us, and deeply committed to it…”

Then, Bankman-Fried made the government an astonishing offer. He suggested FTX would be “more than happy” to open withdrawals for Bahamas customers. “If we don’t hear back from you,” he wrote, “we are going to go ahead and do it tomorrow.” It was an act of desperation by Bankman-Fried’s camp, according to one ally. They were panicked by rumours they were about to be arrested and trying to guess which moves might placate authorities.

Shortly after sending his late-night appeal to the attorney-general, another email dropped into Bankman-Fried’s inbox. Andy Dietderich, at S&C, was suggesting John Ray to tackle the crisis at FTX. Ray is something of a legend in the restructuring world. A 40-year-veteran of insolvency, with military-style short grey hair, Ray has the air of a three-star general, rather than an attorney. He cut his teeth as general counsel of Fruit of the Loom when it went belly up in the 1990s and made his name as the man who oversaw the unwinding of Enron Corp., the corporate fraud of the century. He would soon displace Bankman-Fried as CEO.

Nightmare scenarios

Until Thursday, Bankman-Fried would not entertain the idea of bankruptcy. What brought him to the table for talks with Miller and S&C was the forced liquidation of FTX’s Nassau company by Bahamas authorities. That looked like the beginning of what the company’s U.S. lawyers saw as a nightmare scenario: if each of FTX’s hundreds of companies from Turkey to Japan was separately pushed into bankruptcy, they would be left with an unmanageable mess. Filing in the U.S. was the only way to keep the process even remotely close to controlled.

The Bahamas team’s war room moved to a nearby villa, where Constance Wang lived. The “Conch Shack,” a 9,000-square-foot mansion with a palm-fringed pool in its courtyard, was more private than the penthouse. The relocation was also intended to finally allow team members to get some sleep. Many had been up for three days straight.

Bankman-Fried’s inner circle was starting to fray. Two of his closest lieutenants, Nishad Singh and Ramnik Arora, who led much of FTX’s past fundraising, cracked under the pressure. “Nobody had gone through a disaster before, so people were breaking psychologically,” someone close to them said. “It was never more apparent to me how young all of them were than in the 72-hour period before bankruptcy.” Arora declined to comment.

Caroline Ellison weighed in over chat from Hong Kong, but seemed disengaged. Alameda had gambled hugely and been badly affected by the collapse of digital assets in 2022. Ellison told a colleague she was “relieved” that she wouldn’t have to carry the burden of running Alameda any more. “She felt a little trapped,” the colleague said. “It was over, even if it was a bad ‘over.’”

People in the war room began to notice top executives disappearing. They hoped they were finally sleeping. In fact, some were starting to pack up and leave.

In the afternoon, Bankman-Fried met with Dietderich, the S&C bankruptcy partner, on a video call. To Dietderich’s surprise, the founder sat next to his father. David Mills, another Stanford Law School professor and a white-collar expert, was also on the call, along with a criminal defence expert and restructuring specialist from the law firm Paul, Weiss. All were acting for Bankman-Fried personally.

Dietderich bristled. S&C was working for the company, he said according to court records, and Bankman-Fried was a corporate officer with a fiduciary duty. The presence of the personal lawyers suggested to Dietderich that Bankman-Fried was thinking about his personal legal exposure. After the call, Dietderich told colleagues that a Chapter 11 filing was imminent and called in criminal law colleagues from the firm. Mills declined to comment.

Around 8 p.m., S&C sent Bankman-Fried the draft of a document giving John Ray full control of FTX. As the hours ticked by, with dozens of lawyers and consultants waiting, Bankman-Fried refused to sign.

Email — Nov. 10, 21:20

From: Ryne Miller

To: Sam Bankman-Fried

Sam need this signed ASAP. Let me know.

Email – Nov. 10, 22:36

From: Zach Dexter

To: Sam Bankman-Fried

Sam this is an excellent pick and I wholeheartedly hope you sign this tonight. The faster John is in place, the faster the company can resolve issues that require urgent progress. Those of us remaining can help you significantly if you sign tonight.

  • ‘Sam? Are you there?!’ Part one of the bizarre and brutal final hours of FTX
  • A general without an army: Part three of the final hours of FTX
  • ‘House of cards’: A secret software tweak let crypto exchange FTX use client money
  • Sam Bankman-Fried ran crypto exchange FTX as ‘personal fiefdom,’ court hears

Bankman-Fried’s lawyers haggled over the choice of Ray and the selection of new directors for the company in bankruptcy. They questioned whether filing for bankruptcy in the U.S. would expose Bankman-Fried to more scrutiny from American law enforcement, Dietderich later said in court filings. He said he told Bankman-Fried’s counsel that the worries about his own interest were “inappropriate.” Meanwhile, Miller continued to press.

Read the final instalment on the final hours of FTX 

Joshua Oliver is the FT’s asset management reporter. Additional reporting by William Langley and Chan Ho-him in Hong Kong, Sujeet Indap in New York and Nikou Asgari and Kadhim Shubber in London

© 2023 The Financial Times Ltd.