Exclusive-Behind FTX’s fall, fighting billionaires and a stopped working quote to conserve crypto By Reuters


© Reuters. SUBMIT PICTURE: Representation of cryptocurrency Binance Coin, the native token of the cryptocurrency exchange, is seen in this illustration taken November 29, 2021. REUTERS/Dado Ruvic/Illustration


(This story includes language some readers might discover offending in paragraph 2)

By Angus Berwick and Tom Wilson

(Reuters) – On Tuesday early morning, Sam Bankman-Fried, owner of cryptocurrency exchange FTX, captured his workers off-guard with a mournful message.

“I’m sorry,” he told them. “I fucked up.”

The reason for the mea culpa: His announcement half an hour earlier that FTX’s arch-rival, Binance, planned to mount a shock takeover of its main trading platform to save it from a “liquidity crunch.” Binance founder Changpeng “CZ” Zhao, whom the billionaire had accused of sabotage, would now be his White Knight.

The seeds of FTX’s downfall were sown months earlier, stemming from mistakes Bankman-Fried made after he stepped in to save other crypto firms as the crypto market collapsed amid rising interest rates, according to interviews with several people close to Bankman-Fried and communications from both companies that have not been previously reported.

Some of those deals involving Bankman-Fried’s trading firm, Alameda Research, led to a series of losses that eventually became his undoing, according to three people familiar with the company’s operations.

The interviews and messages also shine new light on the bitter rivalry between the two billionaires, who in recent months competed for market share and publicly accused each other of seeking to hurt the one another’s businesses. It culminated on Wednesday, with Binance pulling out of its deal and throwing FTX’s future into uncertainty.

Stuck without a buyer, Bankman-Fried was now searching for alternative backers, two people close to him said. After Binance pulled out, he told FTX staff in a message that Binance had not previously told them of any reservations about the deal and he was “exploring all options.”

Neither Binance nor FTX responded to requests for comment. Bankman-Fried told Reuters on Tuesday that “I’ll most likely be too overloaded” to do interviews. He didn’t respond to further messages.

Binance earlier said it decided to pull out of the deal as a result of its due diligence on FTX and news reports about U.S. investigations into the company.

Zhao’s unveiling of the planned takeover capped a stunning reversal for Bankman-Fried. The 30-year-old had set up Bahamas-based FTX in 2019 and led it to become one of the largest exchanges, accumulating a near $17 billion fortune.

News of the liquidity crunch at FTX – valued in January at $32 billion with investors including SoftBank and BlackRock (NYSE:) – sent reverberations through the crypto world.

The price of major coins plummeted, with bitcoin slumping to its lowest in almost two years, heaping further pain on a sector whose value has fallen about two-thirds this year as central banks tightened credit.

By ditching the deal, Binance had also avoided the regulatory scrutiny that would likely have accompanied the takeover, which Zhao had flagged as a likelihood in a memo to employees that he posted on Twitter.

Financial regulators around the world have issued warnings about Binance for operating without a license or violating money laundering laws. The U.S. Justice Department is investigating Binance for possible money laundering and criminal sanctions violations. Reuters reported last month that Binance had helped Iranian firms trade $8 billion since 2018 despite U.S. sanctions, part of a series of articles this year by the news agency on the exchange’s financial crime compliance. 


Zhao and Bankman-Fried’s relationship began in 2019. Six months after FTX’s launch, Zhao bought 20% of the exchange for about $100 million, a person with direct knowledge of the deal said. At the time, Binance said the investment was “aimed to grow the crypto economy together.” 

Within 18 months, however, their relationship had soured.

FTX had grown rapidly and Zhao now viewed it as a genuine competitor with global aspirations, former Binance employees said.

When FTX in May 2021 applied for a license in Gibraltar for a subsidiary, it had to submit information about its major shareholders, but Binance stonewalled FTX’s requests for help, according to messages and emails between the exchanges seen by Reuters.

Between May and July, FTX lawyers and advisors wrote to Binance at least 20 times for details on Zhao’s sources of wealth, banking relationships, and ownership of Binance, the messages show.

In June 2021, however, an FTX lawyer told Binance’s chief financial officer that Binance wasn’t “engaging with us properly” and they risked “severely disrupting an important project for us.” A Binance legal officer responded to FTX to say she was trying to get a response from Zhao’s personal assistant, but the requested information was “too general” and they may not provide everything.

By July of that year, Bankman-Fried had tired of waiting. He bought back Zhao’s stake in FTX for about $2 billion, the person with direct knowledge of the deal said. Two months later, with Binance no longer involved, Gibraltar’s regulator granted FTX a license.

That sum was paid to Binance, in part, in FTX’s own coin, FTT, Zhao said last Sunday – a holding he would later order Binance to sell, precipitating the crisis at FTX.

GRAPHIC: Binance dominance (


This May and June, Bankman-Fried’s trading firm, Alameda Research, suffered a series of losses from deals, according to three people familiar with its operations. These included a $500-million loan agreement with failed crypto lender Voyager Digital, two of the people said. Voyager filed for bankruptcy protection the following month, with FTX’s U.S. arm paying $1.4 billion for its assets in a September auction. Reuters could not determine the full extent of losses Alameda suffered.

Seeking to prop up Alameda, which held almost $15 billion in assets, Bankman-Fried transferred at least $4 billion in FTX funds, secured by assets including FTT and shares in trading platform Robinhood Markets Inc (NASDAQ:), individuals stated. Alameda had actually revealed a 7.6% share in Robinhood that May.

A part of these FTX funds were client deposits, 2 of individuals stated, though Reuters might not identify their worth.

Bankman-Fried did not inform other FTX executives about the relocate to prop up Alameda, individuals stated, including he hesitated that it might leakage.

On Nov. 2, nevertheless, a report by news outlet CoinDesk detailed a dripped balance sheet that apparently revealed that much of Alameda’s $14.6 billion in properties were kept in FTT. Alameda CEO Caroline Ellison tweeted that the balance sheet was simply for a “subset of our corporate entities,” with over $10 billion of properties not shown. Ellison did not return ask for remark.

That stopped working to splash growing speculation over what Alameda’s monetary health may imply for FTX.

Then Zhao stated Binance would offer its whole share in the token, FTT, worth a minimum of $580 million, “due to recent revelations that have come to light.” The token’s cost collapsed 80% over the next 2 days and a gush of outflows from the exchange collected rate, blockchain information reveal.


In his message to personnel today, Bankman-Fried stated the company saw a “giant withdrawal surge” as users hurried to withdraw $6 billion in crypto tokens from FTX in simply 72 hours. Daily withdrawals generally amounted to 10s of countless dollars, Bankman-Fried informed his workers.

After Zhao’s tweet that Binance would offer its FTT holding, Bankman-Fried forecasted self-confidence that FTX would weather its competitor’s attacks. He informed personnel on Slack that withdrawals were “not shockingly, way up,” however they had the ability to process the demands.

“We’re chugging along,” he composed. “Obviously, Binance is trying to go after us. So be it.”

But by Monday the circumstance ended up being alarming. Unable to rapidly discover a backer, or offer other illiquid properties short-notice, Bankman-Fried called Zhao, according to an individual knowledgeable about the call. Zhao later on validated that Bankman-Fried had actually called him.

Bankman-Fried signed a non-binding letter of intent for Binance to purchase FTX’s non-U.S. properties. This valued FTX at a number of billion dollars, 2 individuals knowledgeable about the letter stated – enough for the exchange to cover all withdrawal demands however a portion of its January appraisal.

Zhao revealed the possible offer a number of hours later on, with Bankman-Fried tweeting “a huge thank you to CZ.”

“Let’s live to fight another day,” Bankman-Fried informed personnel on Slack.

His workers were surprised. Even executives had actually remained in the dark about the Alameda shortage and takeover strategy till Bankman-Fried notified them that early morning, 2 individuals dealing with him stated. Both individuals stated they had actually been uninformed that the withdrawal circumstance was so severe.

Then came Binance’s statement on Wednesday ditching the takeover. “The issues are beyond our control or ability to help,” Binance stated. Zhao tweeted “Sad day. Tried,” with a sobbing emoji.


News and digital media editor, writer, and communications specialist. Passionate about social justice, equity, and wellness. Covering the news, viewing it differently.

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