From $32 billion to criminal investigations: How Sam Bankman-Fried’s empire vanished overnight. Here’s how the biggest collapse in crypto history went down.

The year was 2017, and the ex-Jane Street Capital quant trader noticed something funny when he looked at the page on CoinMarketCap.com listing the price of bitcoin

 on exchanges around the world. Today, that price is pretty much uniform across the exchanges, but back then, Bankman-Fried previously told CNBC that he would sometimes see a 60% difference in the value of the coin. His immediate instinct, he says, was to get in on the arbitrage trade — buying bitcoin on one exchange, selling it back on another exchange, and then earning a profit equivalent to the price spread.

“That’s the lowest hanging fruit,” Bankman-Fried said in September. The arbitrage opportunity was especially compelling in South Korea, where the exchange-listed price of bitcoin was significantly more than in other countries. It was dubbed the Kimchi Premium – a reference to the traditional Korean side dish of salted and fermented cabbage.

After a month of personally dabbling in the market, Bankman-Fried launched his own trading house, Alameda Research (named after his hometown of Alameda, California, near San Francisco), to scale the opportunity and work on it full-time. Bankman-Fried said in an interview in September that the firm sometimes made as much as a million dollars a day.

Alameda’s success spurred the launch of crypto exchange FTX in the spring of 2019. FTX’s success begat a $2 billion venture fund that seeded other crypto firms. Bankman-Fried’s personal wealth grew to over $16 billion at its peak in March.

Bankman-Fried was suddenly the poster boy for crypto everywhere, and the FTX logo adorned everything from Formula 1 race cars to a Miami basketball arena. The 30-year-old went on an endless press tour, bragged about having a balance sheet that could one day buy Goldman Sachs, and became a fixture in Washington, where he was one of the Democratic party’s top donors, promising to sink $1 billion into U.S. political races (before later backtracking).

It was all a mirage. It was a steep fall from hero to villain. But there were a lot of signs.

“Leverage is the source of every implosion in financial institutions, both traditional and crypto,” said Hart Lambur, a former Goldman Sachs government bond trader who provided liquidity in U.S. Treasuries for central banks, money managers and hedge funds.

″Lehman Brothers, Bear Stearns, Long-Term Capital, Three Arrows Capital and now FTX all blew up due to bad leverage that got sniffed out and exploited by the market,” continued Lambur, who now works in decentralized finance.