The rise and fall of FTX, once a prominent player in the cryptocurrency exchange market, is a tale of rapid growth, ambitious expansion, and a dramatic Collapse. Founded in 2017 by Sam Bankman-Fried, FTX quickly rose to become the third-largest cryptocurrency exchange by volume, boasting over one million users. However, in November 2022, FTX’s fortunes took a drastic turn, leading to one of the most significant bankruptcies in the crypto industry.

The impetus for FTX’s collapse was a CoinDesk article published on November 2, 2022, which revealed that Alameda Research, a trading firm affiliated with FTX and owned by Bankman-Fried, held a significant amount of FTX’s exchange token, FTT. This revelation triggered a massive spike in customer withdrawals, exposing an $8 billion hole in FTX’s accounts. Within days, FTX, Alameda Research, and over 100 affiliated entities filed for bankruptcy. Bankman-Fried resigned as CEO, replaced by John J. Ray III.

FTX’s bankruptcy had a ripple effect across the cryptocurrency markets, drawing comparisons to major financial scandals like Enron and Madoff. The collapse not only wiped out Bankman-Fried’s estimated $16 billion net worth but also led several institutional investors to write off their stakes in the company. In an unauthorized transaction following the bankruptcy, about $473 million in funds were taken from FTX. The fallout significantly impacted the crypto market, with Bitcoin’s price dropping to its lowest level in two years.

The legal ramifications for those involved were severe. Key executives from FTX and Alameda, including Caroline Ellison, Gary Wang, and Nishad Singh, pleaded guilty to defrauding FTX customers and related charges. In a significant development, Sam Bankman-Fried was convicted of defrauding customers of FTX and lenders of Alameda Research, resulting in a prison sentence for FTX’s founder. This verdict marked a significant moment in cryptocurrency history, highlighting the risks and regulatory challenges in the digital asset space.

Bankman-Fried’s spectacular rise and fall have been the subject of intense scrutiny. Once a celebrated figure in the crypto world, his reputation took a severe hit following the collapse of FTX. His testimony before Congress, high-profile endorsements, and public promises of FTX’s stability were all brought into question. The trial revealed how Bankman-Fried used Alameda Research to siphon billions from customer accounts at FTX for personal gain and influence. His conviction on all counts of fraud underscores the magnitude of his actions and their impact on the industry.

What are alternatives to FTX?

For Americans looking for a way to buy various cryptocurrencies, the most reliable option is Coinbase, though it has also become best practice to store cryptocurrencies in non-custodial wallets (so your funds are safe from the collapse of a exchange or platform). Many now choose to transfer their token to a quality non-custodial wallet like NOW Wallet, a product of NOWPayments.

What Happened to FTX? was originally published in FAIL Company on Medium, where people are continuing the conversation by highlighting and responding to this story.