FTX, founded by Sam Bankman-Fried in 2019, grew to become the third-largest crypto exchange in the world with a peak valuation of $32 billion. SBF, as he was known, became the public face of “responsible crypto” — testifying before Congress, donating to politicians, and advocating for regulation. Then on November 8, 2022, it all collapsed in five days.
The catalyst was a CoinDesk article on November 2 revealing that Alameda Research — SBF’s trading firm, supposedly separate from FTX — held billions in FTT tokens (FTX’s exchange token) as assets on its balance sheet. Binance CEO CZ tweeted that Binance would liquidate its FTT holdings. FTX users panicked and withdrew $6 billion in 72 hours. FTX couldn’t meet redemptions because the money wasn’t there — it had been lent to Alameda.
FTX filed for bankruptcy on November 11, 2022. The subsequent investigation revealed staggering fraud: customer funds had been secretly transferred to Alameda, which had lost billions on bad trades and investments. FTX’s accounting was essentially non-existent — the company used QuickBooks. Billions in customer deposits were unaccounted for. It was the largest financial fraud in crypto history and one of the largest in American history.
SBF was arrested in the Bahamas in December 2022, extradited to the US, tried in October 2023, convicted on all seven charges of fraud and conspiracy, and sentenced to 25 years in federal prison in March 2024. Caroline Ellison (Alameda CEO) and Gary Wang (FTX CTO) cooperated with prosecutors and received reduced sentences. The trial revealed that SBF had knowingly used customer funds for personal expenses, political donations, and Alameda’s trading losses. The “boy genius” narrative collapsed completely under the weight of the evidence.
Leave a Reply