Brief Timeline Of FTX's Collapse And A Look At What Elon Musk Said About FTX's Founder Sam Bankman-Fried

Let's take last week as a starting point. Last week, Changpeng Zhao (CZ) of Binance tweeted that, "As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books."

"We will try to do so in a way that minimizes market impact. Due to market conditions and limited liquidity, we expect this will take a few months to complete. Binance always encourages collaboration between industry players. Regarding any speculation as to whether this is a move against a competitor, it is not. Our industry is in it’s nascency and every time a project publicly fails it hurts every user and every platform," he continued.

"We typically hold tokens for the long term. And we have held on to this token for this long. We stay transparent with our actions," he added.

What prompted these tweets? Well, the revelations CZ is talking about refers to a story published by CoinDesk, which revealed some disturbing details.

The report stated that nearly half of Alameda Research’s assets were its own FTT tokens i.e. $6B of $15B.

The relationship between FTX and Alameda Research has always been very opaque, both were founded by SBF. Here is what these two entities did -

• FTX creates FTT token

A user name Lyn Alden on Twitter offers an even simpler example.

"Imagine McDonald's makes its own money, let's call them clown-bucks, keeps most of it, and sells some to the market. McDonald's then uses their remaining clown-bucks as collateral for actual loans. And then people remember clown-bucks aren't real," she writes, and that pretty much sums it up.

The “value” of FTT relies entirely on the public’s perception of SBF and FTX, and the sky-high reputation was due to favourable press, famous partnerships and the mind of an apparent 'savant'. Some may remember Elizabeth Holmes. She had all these 3 factors going for her as well.

As of October this, SBF's marvellous boat stared started developing holes.

Trading volume went down due to the crypto crash. Competition from decentralised exchanges were rising, the same exchanges that SBF wanted to regulate out of existence, to consolidate his own firms. Top-level executives working under SBF started resigning. SBF started dabbling in random side projects (even trying to get into Elon’s deal for Twitter)and the allegations of market manipulation began surging.

In a Twitter space on Saturday, Musk said that when SBF offered him $3 billion to help him with his Twitter acquisition, his (Musk's) BS alarm went off. Musk also divulged that after talking with SBF for 30 minutes, he felt "something was wrong".

“To be honest, I’d never heard of him. But then I got a ton of people telling me he’s got, you know, huge amounts of money that he wants to invest in the Twitter deal. And I talked to him for about half an hour. And I know my bullshit meter was redlining. It was like, this dude is bullshit – that was my impression," said Elon Musk.

“Then I was like, man, everyone including major investment banks, everyone was talking about him like he’s walking on water and has a zillion dollars. And that (was) not my impression, that dude is just – there’s something wrong. And he does not have capital, and he will not come through. That was my prediction,” added Musk.

Now, back to Binance's head, CZ. CZ runs the largest crypto exchange in the world and is the industry’s richest person. He started unloading his FTT position ($500m+). It is not clear why CZ did it, but rumours suggest he did it after he got into a beef with SBF on Twitter, where SBF mocked him and asked "is he even allowed to enter into Washington".

“FTX is fine. Assets are fine," said SBF after CZ started unloading his FTT position. “FTX has enough to cover all client holdings” said SBF. All these tweets of his have been deleted now.

In the time period between Sunday and Monday, customers of FTX withdrew $6 billion. FTX soon announced that no more withdrawals would be allowed.

On Tuesday, SBF and CZ both tweeted out that Binance will acquire FTX, pending due diligence.

Next day, after the due diligence, CZ walked away from the deal, claiming it is beyond their capability to make the firm "whole", adding that at least $8 billion would be required, which reveals that FTX was using the money of depositors for the hedge fund Almada (not legal).

A report from Reuters reads, "In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software...

..They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said."

FTX has now filed for bankruptcy. According to a report from CNBC, the bankruptcy filing says that "there are 100k+ creditors with assets in the range of $10 billion to $50 billion, as well as liabilities in the range of $10 billion to $50 billion."

However, a report from Financial Times states that, "FTX has $9B in liabilities against less than $900m in liquid cash…and the largest liquid position was a $470mn of Robinhood shares owned by a Bankman-Fried vehicle not listed in Friday’s bankruptcy filing.”

It isn't clear if small investors who trusted the platform and invested their money will get any of their money back. What will happen to SBF remains unclear as well.