FTX

• 1. Founding And Early Growth

  ›

  Sam Bankman-Fried and Gary Wang launched FTX in May 2019 within the walls of Alameda Research, a trading firm they had established three years earlier. The exchange began as an abbreviation for Futures Exchange, operating quietly before expanding its reach into global markets. By August 2020, the company acquired Blockfolio, a cryptocurrency portfolio tracking application, spending $150 million to integrate it into their ecosystem. This acquisition marked one of the first major moves by the startup to diversify beyond simple futures trading.

  In July 2021, venture capital firms poured nearly $900 million into the business, valuing the enterprise at $18 billion. Over sixty investors participated in this round, including Softbank Group and Sequoia Capital. Changpeng Zhao, CEO of Binance, initially held a twenty percent stake worth approximately $100 million until Bankman-Fried bought him out later that year for roughly $2 billion. The headquarters moved from Hong Kong to The Bahamas in September 2021, positioning the firm closer to favorable regulatory environments while distancing itself from stricter Asian oversight.

  By November 2022, the platform boasted over one million users and ranked third globally by trading volume. Its app marketed itself as a safe entry point for new crypto enthusiasts, promising ease of use alongside security features. FTX Ventures launched on the 14th of January 2022, with a $2 billion fund raising goal, securing $400 million in Series C funding. The subsidiary aimed to support developers integrating blockchain assets into video games through a dedicated gaming division announced in February 2022.

  253031

• 2. The Alameda Connection

  ›

  Bloomberg reported in September 2022 that Alameda Research functioned as a primary market maker for FTX during its early history. This relationship allowed the trading firm to become the largest known depositor of stablecoins on the exchange throughout June and July 2022. Regulatory bodies overseeing traditional equity markets would have prohibited such close ties between an exchange and its own liquidity provider if standard rules applied here.

  John J. Ray III later described this arrangement as a secret exemption from FTX's auto-liquidation protocol, calling it a complete failure of corporate controls. Between early 2021 and March 2022, Alameda accumulated vast amounts of cryptocurrency tokens before FTX officially listed them for public trading. Anonymous sources told The Wall Street Journal that FTX lent approximately $10 billion of customer funds to Alameda Research by 2022.

  Caroline Ellison, CEO of Alameda, admitted to other employees that she, Bankman-Fried, Gary Wang, and Nishad Singh knew client deposits were being transferred out of FTX without authorization. These funds helped pay back loans taken by Alameda to make investments elsewhere. Ray noted that the company used software specifically designed to conceal how these assets moved through their systems.

  477475

• 3. November Crisis And Collapse

  ›

  CoinDesk published a report on the 2nd of November 2022 revealing that Alameda held billions in FTT tokens issued by FTX itself. The balance sheet showed over $3.66 billion in unlocked FTT alongside additional collateral worth more than $2 billion. Days after this disclosure, Changpeng Zhao announced via Twitter that Binance intended to sell all its holdings of the token due to recent revelations about mishandled funds.

  The announcement triggered a three-day depositor run estimated at $6 billion as customers rushed to withdraw money from the platform. On November 8, Zhao stated his firm had entered into a non-binding agreement to purchase FTX during what he called a liquidity crisis. However, Bloomberg reported later that day that the deal was unlikely given the poor state of finances involved.

  Binance withdrew its offer on November 9 citing reports of customer fund mismanagement and pending investigations by U.S. agencies. Bankman-Fried learned of the decision through press coverage rather than direct communication with Zhao. By November 11, both FTX and FTX.US filed for Chapter 11 bankruptcy proceedings in Delaware while authorities froze assets belonging to one subsidiary named FTX Digital Markets Ltd.

  838698

• 4. Investor Fallout And Market Contagion

  ›

  Institutional investors faced massive losses when Sequoia Capital wrote down its equity stake to zero on November 9, losing approximately $214 million. Tiger Global Management, BlackRock, Temasek, and SoftBank Group also stood to lose significant capital tied up in their investments. The Ontario Teachers' Pension Plan released statements confirming similar exposure levels within their portfolios.

  Public figures including Tom Brady, Shaquille O'Neal, Stephen Curry, Gisele Bündchen, and Kevin O'Leary invested money or received compensation for promoting the company after its collapse. Investors sued model Gisele Bündchen over her role as ESG advisor following accusations she participated in schemes targeting unsophisticated buyers. Anthony Scaramucci announced his firm attempted to buy back a thirty percent stake owned by FTX itself.

  Cryptocurrency markets experienced sharp declines immediately upon news breaking. Tether dropped below its peg price to ninety-seven cents while Bitcoin fell to its lowest value in two years. Solana prices declined due to Bankman-Fried's affiliation with the project. Crypto.com lost roughly $1 billion in token value attributed partly to fears of a similar collapse occurring there.

  56576579

• 5. Criminal Investigations And Sentencing

  ›

  Ryan Salame became another executive sentenced to seven-and-a-half years in prison starting in October 2024 along with orders to pay over five million dollars in restitution while forfeiting six additional millions. These outcomes reflected efforts to hold individuals accountable for actions taken during the period when client funds were misappropriated.

  A U.S. Bankruptcy Court approved a restructuring plan on the 7th of October 2024 designed to repay customers holding balances under fifty thousand dollars their full amounts back using cryptocurrency values calculated at collapse dates. The Commodity Futures Trading Commission declared this recovery effort the largest such instance in its history totaling $12.7 billion distributed among former clients and victims.

  The sum included eight point seven billion dollars designated specifically for restitution alongside four billion dollars allocated toward disgorgement payments required by law. FTX told courts filing documents dated the 8th of May 2024 that most customers would receive all owed money leaving surplus resources available for future distributions or legal settlements.

  919497