Finance · Case #0041
Primary Record
FTX valued at $32B in January 2022. Filed for bankruptcy 9 months later with $8.8B in customer funds missing CoinDesk Nov 2, 2022: Alameda Research balance sheet was 74% FTT tokens — illiquid assets created by FTX itself Nov 6: CZ tweets Binance will sell $585M in FTT. Bank run begins. FTX halts withdrawals within 72 hours FTX insiders were the second-largest individual political donor group in 2022 midterms — behind only George Soros SBF parents received $16.4M Bahamas penthouse — documented in bankruptcy filing Trial: Caroline Ellison testified Alameda had a secret backdoor allowing unlimited FTX customer fund access Sequoia Capital deleted its 10,000-word profile of SBF the same day FTX halted withdrawals SBF convicted on all 7 counts — wire fraud, securities fraud, money laundering. Sentenced to 25 years FTX valued at $32B in January 2022. Filed for bankruptcy 9 months later with $8.8B in customer funds missing
📁 Red String · Case #0041 · Financial Fraud · Court Record
SDNY Trial Record · FTX Bankruptcy Filings · DOJ Press Releases · SEC & CFTC Complaints · OpenSecrets

FTX:
The $8.8 Billion Fraud

Sam Bankman-Fried built a $32 billion crypto exchange on a lie: customer funds were not segregated. They flowed to Alameda Research, his private trading firm, which used them to fund political donations, Bahamas real estate, venture investments, and losing trades. Eight days after a single tweet, it was over. This is the primary record.

By R. Connell · Red String Investigation $8.8B missing $93M in donations 25 yrs sentence 16 primary sources
METHODOLOGY: All claims sourced to court filings, trial testimony, DOJ/SEC/CFTC complaints, FTX bankruptcy proceedings, or documented public record. Where something was alleged vs. proven at trial, the distinction is noted. Caroline Ellison's trial testimony, Gary Wang's guilty plea allocution, and the SDNY indictment are the foundational documents for the fraud mechanism section.

What FTX Actually Was

FTX was founded in May 2019 by Sam Bankman-Fried, then 27, and Gary Wang. It grew rapidly into the second-largest cryptocurrency exchange in the world, reaching a peak valuation of $32 billion in a January 2022 funding round backed by Sequoia Capital, Paradigm, SoftBank, and the Ontario Teachers' Pension Plan, among others.

The public story was carefully constructed. SBF presented himself as a committed effective altruist — someone who earned money specifically to donate it to the most impactful causes. He was featured on the cover of Fortune and Forbes. He testified before Congress on cryptocurrency regulation. He was described in a Sequoia Capital profile, later deleted, as "the next Warren Buffett." Anthropic, the AI company, received $500 million in FTX funding. The World Economic Forum named SBF a Young Global Leader.

The private reality, documented in full at trial: FTX customer funds were never segregated. From early in FTX's operation, Alameda Research — SBF's separately incorporated trading firm — had a secret line of credit to FTX's customer deposit accounts. Gary Wang, FTX's CTO, testified that he wrote the code that created this access at SBF's direction. Customers depositing funds to FTX were, without their knowledge, funding Alameda's trading operations, political donations, and real estate purchases.

$32BFTX peak valuation — January 2022 funding round
$8.8BCustomer funds missing at collapse — confirmed in bankruptcy
8Days from CoinDesk exposé to bankruptcy filing
25yrSBF sentence — U.S. District Court SDNY, March 2024
Source: SDNY Indictment S5 23 Cr. 10; Gary Wang guilty plea allocution (Dec. 2022); FTX bankruptcy petition (Nov. 11, 2022)

The Mechanism: How $8.8 Billion Moved

The fraud worked through a mechanism described in granular detail at trial. FTX customers deposited funds through bank accounts technically held by North Dimension Inc., a subsidiary of Alameda Research — not FTX. The commingling was structural, not incidental. Alameda had what prosecution witnesses called an "allow negative" flag in FTX's code: it could withdraw funds beyond its actual account balance, drawing on the general customer deposit pool without limit.

The FTX → Alameda Fund Flow
Per Gary Wang and Caroline Ellison trial testimony — SDNY 2023
FTX Customers
Depositing USD, crypto
Deposited to
North Dimension
North Dimension
Alameda subsidiary
(not FTX entity)
"Allow negative"
backdoor code
Alameda Research
SBF's trading firm
Funded
Loans / Donations
Real Estate / Trades
~$8.8B total

Caroline Ellison, CEO of Alameda and SBF's former romantic partner, testified that by mid-2022, Alameda had borrowed approximately $14 billion from FTX's customer funds. Of this, roughly $8.8 billion could not be repaid when FTX collapsed. Ellison also testified that she had prepared seven different balance sheets at SBF's direction — versions that concealed the true extent of Alameda's liabilities from lenders. She pled guilty to seven counts of fraud in December 2022 and became the prosecution's central witness at trial.

The collateral used to justify Alameda's borrowing was primarily FTT tokens — a cryptocurrency created and issued by FTX itself. As of the CoinDesk exposé in November 2022, Alameda's balance sheet showed approximately $5.8 billion in FTT as its primary asset. This was self-referential collateral: FTX had issued the tokens, FTX controlled significant supply, and the market for FTT was far too illiquid to liquidate at book value. When confidence in FTX collapsed, the FTT price collapsed with it, eliminating the collateral backing Alameda's entire position.

Source: Caroline Ellison trial testimony, SDNY October 2023; Gary Wang guilty plea allocution; SEC Complaint SEC v. FTX Trading Ltd. (Dec. 2022)

The Eight Days: November 2–11, 2022

NOV 2
Exposé
CoinDesk publishes Alameda balance sheet
Journalist Ian Allison reports that Alameda's balance sheet showed $14.6B total assets, with $5.82B of that in FTT tokens — illiquid assets created by FTX itself. First public indication of structural dependency between FTX and Alameda. SBF and Ellison attempt to minimize the story.
NOV 6
Trigger
CZ tweets Binance will liquidate all FTT holdings
Changpeng Zhao, CEO of Binance (FTX's largest competitor), announces Binance will sell its FTT holdings — approximately $585M — citing "recent revelations" and risk management. The tweet triggers a bank run. FTX processes more than $6B in withdrawal requests in the following 72 hours.
NOV 7
Negotiations
Binance signs nonbinding letter of intent to acquire FTX
SBF calls CZ directly. CZ agrees to explore acquisition. Nonbinding LOI signed. Markets temporarily recover. Within 24 hours, Binance reviews FTX's books and withdraws, citing "mishandled customer funds" and DOJ investigation concerns. This is the moment FTX's collapse becomes certain.
NOV 8
Halted
FTX halts all withdrawals
FTX announces it has paused all customer withdrawals, deposits, and trading. Effectively the exchange is insolvent. FTT price crashes 80%+ in 24 hours. SBF begins a public messaging campaign on Twitter, stating "FTX is fine. Assets are fine." This tweet becomes a prosecution exhibit.
NOV 9
Withdrawal
Binance formally withdraws from acquisition
Binance issues a one-sentence statement: "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." The deal is dead.
NOV 11
Bankruptcy
FTX files Chapter 11. SBF resigns as CEO.
FTX, FTX US, Alameda Research, and approximately 130 affiliated entities file for Chapter 11 bankruptcy in Delaware. John J. Ray III — who oversaw the Enron bankruptcy — is appointed CEO. His first public statement: "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here."
DEC 12
Arrested
SBF arrested in the Bahamas
Bahamian authorities arrest SBF at his penthouse on Prospect Ridge, Nassau, at the request of the United States government. He is extradited to the United States and appears in court in Manhattan December 22, 2022. The indictment charges seven counts including wire fraud, commodities fraud, and money laundering.
Source: DOJ press release Dec. 13, 2022; FTX bankruptcy petition Nov. 11, 2022; John J. Ray III first-day declaration; contemporaneous Reuters, FT, Bloomberg reporting

The Political Network: $93 Million Across Both Parties

FTX's political operation was systematic, bipartisan, and documented in Federal Election Commission filings. In the 2022 midterm election cycle, FTX insiders were the second-largest individual donor group in the United States, trailing only George Soros. The donations were structured to give the appearance of two distinct donor profiles — SBF publicly to Democrats, Ryan Salame to Republicans — while both drew from the same fraudulently obtained funds.

Democratic Donations (SBF + Nishad Singh)Republican Donations (Ryan Salame)
$70M+
$23M
DonorRoleAmountDirectionOutcome
Sam Bankman-FriedCEO, FTX$40M+DemocraticConvicted 7 counts
Nishad SinghDir. Engineering, FTX$30M+DemocraticGuilty plea, cooperator
Ryan SalameCo-CEO, FTX Digital Markets$23M+RepublicanGuilty plea, 7.5 years

SBF had cultivated a specific regulatory agenda alongside the donations. He was publicly advocating for the DCCPA — the Digital Commodities Consumer Protection Act — a bill that would have placed crypto regulation under the CFTC rather than the SEC. Critics including Coinbase's Brian Armstrong argued the bill was written to entrench existing large players (FTX) while burdening smaller competitors with compliance costs. SBF met with CFTC commissioners directly. The bill never passed; the donations continued.

At trial, prosecutors demonstrated that SBF's "effective altruism" framing was itself a fraud instrument. He told large donors and investors that he intended to donate most of his wealth to charity, projecting an image that attracted both investment and favorable media coverage. The donations came from Alameda customer funds — not FTX profits. The charity was, in part, a reputation laundry operation.

Source: OpenSecrets FEC filing analysis; DOJ indictment Count 5 (campaign finance fraud); trial testimony; DCCPA lobbying record

“He was trying to use political influence to shape the regulatory environment in a way that would benefit FTX at the expense of its competitors. He was using customer money to do it.”

Prosecutor Nicholas Roos — closing argument, SDNY October 2023

The Bahamas: Real Estate and Parents

FTX moved its headquarters from Hong Kong to the Bahamas in September 2021, a decision SBF publicly attributed to the country's favorable regulatory environment. The bankruptcy filing revealed a second function: the Bahamas served as a vehicle for transferring customer funds into real estate assets.

The FTX bankruptcy estate identified more than $300 million in Bahamas property purchased by FTX and its principals. Thirty-five properties were documented in the filings. These included luxury apartments, condominiums, and commercial space purchased in the names of FTX executives, Alameda Research, and entities affiliated with FTX's Bahamas subsidiary, FTX Digital Markets.

FTX Bankruptcy — Day One Declaration (John J. Ray III, Nov. 11, 2022)
Bankruptcy Filing
"The FTX Group's collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people's money or assets... In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors."

Among the properties identified: a $16.4 million penthouse at Albany, a luxury resort development in Nassau, transferred to Joseph Bankman and Barbara Fried — SBF's parents, both Stanford Law School professors. The bankruptcy estate sued Bankman and Fried to recover the property. The parents settled for $5.5 million in 2024 without admitting wrongdoing. Their settlement required them to assist with the bankruptcy recovery effort.

Ryan Salame's Bahamas property holdings were separately documented in his sentencing materials. Salame received a seven-and-a-half-year federal prison sentence in September 2024 after cooperating partially with prosecutors. His girlfriend, Michelle Bond — who ran for Congress in 2022 with Salame donating $8 million to a Super PAC supporting her campaign — was separately charged with campaign finance violations.

Source: FTX bankruptcy docket — Bankman/Fried adversary proceeding; Ray Day One Declaration; Salame sentencing memorandum; DOJ Michelle Bond indictment

The Investors Who Missed It

The largest institutional investors in FTX performed due diligence before committing hundreds of millions of dollars. They missed what the evidence subsequently showed was a years-long structural fraud. Their post-collapse responses — and the speed at which they distanced themselves from SBF — are documented.

Sequoia Capital — "Sam Bankman-Fried Has a Savior Complex" (October 2022)
Deleted Article
Sequoia published a 10,000-word laudatory profile of SBF in October 2022, describing him as a potential "trillionaire" and the "next Warren Buffett." The article was deleted from Sequoia's website on November 9, 2022 — the day Binance withdrew from the acquisition. Sequoia had invested $214 million across two FTX funds at a combined $32 billion valuation. Both were written down to zero.
$214MSequoia Capital — written down to zero
$95MOntario Teachers' Pension Plan — total loss
$100MSoftBank Vision Fund 2 — written down to zero
$500MAnthropic AI funding from FTX — not clawed back

The Ontario Teachers' Pension Plan — a public pension fund managing the retirement savings of Canadian teachers — disclosed a $95 million exposure in November 2022, described as a "small investment" relative to the fund's $242 billion in net assets. The SBF personal charm offensive was well documented: he had a gift for speaking the language of each investor category — risk-adjusted expected value for rationalists, ESG and effective altruism for socially conscious LPs, and regulatory savvy for institutional allocators.

At trial, the prosecution presented evidence that SBF had deliberately misled investors by providing false financial statements through Ellison. Multiple balance sheets were prepared specifically to conceal Alameda's FTX liabilities from institutional lenders including Genesis, Voyager, and BlockFi — all of whom subsequently collapsed in part due to FTX contagion.

Source: Sequoia FTX investments — fund disclosures; Ontario Teachers' Pension Plan November 2022 statement; SoftBank quarterly earnings disclosure; Anthropic investment confirmed in bankruptcy filings

The Trial and Conviction

The trial of United States v. Bankman-Fried began October 3, 2023, in the Southern District of New York before Judge Lewis Kaplan. It lasted approximately one month. Four of SBF's former associates — Caroline Ellison, Gary Wang, Nishad Singh, and Ryan Salame — had all pled guilty and were available as prosecution witnesses. The prosecution case was built primarily on their testimony.

Ellison's testimony was the most consequential. Over two days on the stand, she described in precise detail how FTX customer funds were used — the seven different balance sheets she prepared to hide liabilities from lenders, the $8 billion gap that emerged when FTX customer withdrawals began overwhelming Alameda's ability to repay, and conversations with SBF in which he directed her to use customer funds for investments and loans. She described the relationship as one in which she executed his decisions while understanding they were fraudulent.

SBF chose to testify in his own defense — a rare decision in white-collar fraud cases. Over approximately 20 hours of testimony, he claimed he was unaware of the true scale of Alameda's FTX borrowings, that he had relied on Ellison and Wang to manage risk properly, and that the collapse was the result of a liquidity crisis rather than fraud. The jury did not find this credible.

CountChargeMax SentenceVerdict
1Wire fraud on FTX customers20 yearsGuilty
2Wire fraud conspiracy on FTX customers20 yearsGuilty
3Securities fraud on FTX investors20 yearsGuilty
4Securities fraud conspiracy on investors5 yearsGuilty
5Wire fraud on Alameda lenders20 yearsGuilty
6Money laundering20 yearsGuilty
7Commodities fraud conspiracy10 yearsGuilty

Judge Kaplan sentenced SBF on March 28, 2024, to 25 years in federal prison — a sentence substantially below the government's request of 40 to 50 years, but far above the defense's argument for 6.5 years. Kaplan cited the scale of the fraud, the deliberate nature of the deception, and what he called the "risk of recidivism" — his assessment that SBF would commit fraud again if given the opportunity.

In their sentencing submissions, prosecutors documented that SBF had attempted to influence witness testimony during the period between his arrest and trial. He had shared Caroline Ellison's private diary entries with a New York Times reporter. He had given interviews to numerous media outlets from home detention — a period Kaplan ultimately ended by revoking bail. The government argued this behavior was consistent with the fraud itself: a pattern of calculated manipulation of information and perception.

Source: SDNY jury verdict Oct. 12, 2023; sentencing transcript March 28, 2024; DOJ sentencing memorandum; defense sentencing memorandum

The Aftermath: Recovery and Contagion

FTX's bankruptcy estate — managed by John J. Ray III and his team — has recovered more funds than most analysts initially projected. As of early 2025, the estate had identified approximately $14.5 billion in assets and approved a plan to repay customers at 100 cents on the dollar plus interest from the date of bankruptcy. This outcome was exceptional in crypto fraud cases, driven by the recovery of illiquid assets including Anthropic equity and seized FTT tokens, and by the clawback of fraudulent transfers.

The contagion from FTX's collapse extended well beyond the exchange itself. Genesis Global — a crypto lender with $175 million in FTX exposure — filed for bankruptcy in January 2023. BlockFi, which had already received an emergency credit facility from FTX, filed in November 2022. Voyager Digital, which had previously been rescued from collapse by an FTX bid, lost that rescue when FTX collapsed. The crypto market capitalization fell approximately $200 billion in the week following FTX's failure.

The campaign finance donations remain largely uncollected. The bankruptcy estate filed suits against both major parties to recover the donations, arguing they were made with stolen customer funds. Most recipients have resisted returning the money, citing good-faith receipt of what appeared to be legal contributions. The litigation was ongoing as of early 2026.

◆ What the Trial Record Establishes

FTX customer funds were commingled with Alameda Research funds from the beginning. SBF directed the transfer. Gary Wang wrote the backdoor code that enabled unlimited access. Caroline Ellison executed the borrowing and falsified the balance sheets. The political donations, Bahamas real estate, and venture investments were paid for with customer money. SBF was convicted unanimously on all seven counts. The jury deliberated for four hours. None of this requires inference — it is the trial record.

Primary Sources
[1]
SDNY Indictment — United States v. Bankman-Fried, S5 23 Cr. 10 (SDNY). Seven-count superseding indictment. All substantive fraud allegations.
[2]
Caroline Ellison — Trial Testimony, SDNY October 10–11, 2023. Primary account of fund flows, falsified balance sheets, and SBF's direction of the scheme.
[3]
Gary Wang — Guilty Plea Allocution, SDNY December 19, 2022. Wang's own account of writing the "allow negative" backdoor at SBF's direction.
[4]
FTX Bankruptcy — Day One Declaration of John J. Ray III, November 11, 2022. First comprehensive account of corporate control failures, real estate purchases, Bahamas assets.
[5]
SEC Complaint — SEC v. FTX Trading Ltd. and Samuel Bankman-Fried, December 13, 2022. Securities fraud charges; Alameda's special status on FTX platform.
[6]
CFTC Complaint — CFTC v. FTX Trading Ltd. et al., December 13, 2022. Commodities fraud; misuse of customer funds detailed.
[7]
DOJ Press Release — SBF Arrest and Indictment, December 13, 2022. Official announcement; summary of charges.
[8]
DOJ Sentencing Memorandum — United States v. Bankman-Fried, March 2024. Government's case for 40–50 year sentence; recidivism analysis.
[9]
Ian Allison — CoinDesk, "Divisions in Sam Bankman-Fried's Crypto Empire Blur on His Trading Titan Alameda's Balance Sheet," November 2, 2022. The article that triggered the collapse.
[10]
OpenSecrets — FTX Federal Lobbying and Donations Database. FEC filings: SBF, Nishad Singh, Ryan Salame contribution records.
[11]
FTX Bankruptcy Estate — Adversary Proceedings. Bankman/Fried property suit; political donation clawback suits; status reports through 2025.
[12]
Ryan Salame — Sentencing Memorandum and Plea, SDNY 2024. Bahamas operations; campaign finance violations; 7.5-year sentence.
[13]
Nishad Singh — Guilty Plea and Cooperation Agreement, SDNY February 2023. FTX engineering role; Democratic donations; cooperation terms.
[14]
SDNY Sentencing Transcript — United States v. Bankman-Fried, March 28, 2024. Judge Kaplan's 25-year sentence; recidivism analysis; bail revocation history.
[15]
Sequoia Capital — FTX Investment Fund Disclosures. $214M written to zero; "Sam Bankman-Fried Has a Savior Complex" — deleted October 2022 profile.
[16]
Ontario Teachers' Pension Plan — Q3 2022 Disclosure. $95M FTX exposure confirmed; written to zero.