The collapse of FTX
once one of the world’s largest cryptocurrency exchanges, marked a dramatic turning point in the crypto industry. Founded in 2019 by Sam Bankman-Fried (SBF), FTX quickly rose to prominence, valued at $32 billion by early 2022. Known for its sleek interface, aggressive marketing, and prominent endorsements, FTX became a go-to platform for crypto traders.
However, in November 2022, the company filed for bankruptcy after a liquidity crisis exposed deep financial mismanagement. Investigations revealed that FTX had secretly used customer deposits to cover risky bets made by its affiliated trading firm, Alameda Research, also founded and controlled by SBF. Alameda had borrowed billions from FTX without users’ knowledge, using those funds for investments, political donations, and luxury real estate.
The crisis began when a CoinDesk report exposed vulnerabilities in Alameda’s balance sheet, raising doubts about FTX’s solvency. This led to a surge of customer withdrawals. When FTX couldn’t meet these demands, it froze withdrawals, causing panic across the crypto ecosystem. A proposed bailout by rival exchange Binance fell through, accelerating FTX’s downfall.
The aftermath was massive: over one million creditors were affected, with billions of dollars in losses. Regulatory agencies in the U.S. and abroad launched investigations, and in December 2022, Sam Bankman-Fried was arrested in the Bahamas. He faced multiple federal charges, including wire fraud, securities fraud, and money laundering.
In 2023, SBF was found guilty on all counts and sentenced in early 2024 to 25 years in prison. The FTX case became a symbol of the crypto industry’s need for transparency, oversight, and investor protection. It also triggered renewed regulatory scrutiny around the world, shaping future policy discussions on digital assets.
The FTX collapse remains one of the largest financial scandals in recent history, comparable to Enron and Lehman Brothers in scale and impact.