FTX was a centralized cryptocurrency derivatives and spot exchange founded in 2019 by Sam Bankman-Fried (SBF) and Gary Wang, initially based in Hong Kong before relocating its headquarters to the Bahamas. At its peak in 2021–2022, FTX was the second-largest crypto exchange by volume, valued at $32 billion in a January 2022 funding round backed by Sequoia Capital, SoftBank, Temasek, and others. In November 2022, FTX collapsed in one of the most dramatic financial failures in history after CoinDesk reported on concerning balance sheet data from affiliated trading firm Alameda Research — triggering a bank run SBF could not survive. SBF was convicted on all seven counts of fraud and conspiracy in November 2023.
Background and Rise
SBF co-founded Alameda Research (a crypto trading firm) in 2017 before launching FTX in 2019. FTX marketed itself as the sophisticated exchange for professional traders, offering advanced derivatives products, leveraged tokens, volatility tokens, and a cleaner UI than competitors. FTX US (regulated domestic arm), Blockfolio (acquired 2020), and FTX Ventures (VC arm) expanded the brand rapidly. FTX’s native token FTT was used as collateral across both FTX and Alameda.
The Collapse (November 2022)
| Date | Event |
|---|---|
| Nov 2, 2022 | CoinDesk publishes Alameda Research balance sheet leak showing $5.8B in FTT as primary collateral |
| Nov 6, 2022 | Binance CEO CZ announces Binance will liquidate all FTT holdings |
| Nov 6–8, 2022 | $6B+ in net withdrawals; FTX freezes customer withdrawals |
| Nov 9, 2022 | Binance signs non-binding LoI to acquire FTX, withdraws next day after due diligence |
| Nov 11, 2022 | FTX files Chapter 11 bankruptcy; SBF resigns; John J. Ray III appointed CEO |
| Dec 12, 2022 | SBF arrested in the Bahamas and extradited to the United States |
| Nov 2023 | SBF convicted on all 7 counts; sentenced to 25 years in March 2024 |
Alameda Intermingling
Post-bankruptcy investigation revealed that FTX customer deposits — estimated at $8+ billion — were used by Alameda Research to fund its trading operations, venture investments, real estate acquisitions, and political donations. Customer funds were not segregated and were not available to meet withdrawal demands when the bank run occurred.
Contagion
FTX’s collapse triggered market-wide contagion: BlockFi, Genesis Trading, Voyager (already bankrupt), and others had material exposure. The total crypto market capitalization fell from ~$1T to ~$800B within days, and Bitcoin fell from ~$21k to ~$16k.
Related Terms
Sources
- FTX Bankruptcy Docket — official Chapter 11 proceedings.
- DOJ v. Bankman-Fried — criminal case documentation.