FTX Collapse: The Full Story of Sam Bankman-Fried & The $32 Billion Crypto Scandal

Early Life and Rise of SBF

• 💡 Sam Bankman-Fried (SBF), born to Stanford law professors, showed early interest in logic and math, studying physics and mathematics at MIT.
• 💼 He began his career at Jane Street Capital, a quantitative trading firm, gaining experience in arbitrage, options, and high-frequency trading.

Founding Alameda and FTX

• 🚀 In 2017, SBF founded Alameda Research, specializing in cryptocurrency arbitrage trading, notably profiting from the "Kimchi premium."
• 📈 He launched FTX in 2019, positioning it as a sophisticated crypto exchange "built by traders for traders," offering futures contracts and its native FTT token.
• ✨ FTX experienced meteoric growth, reaching a $32 billion valuation and making SBF a media darling, known for his effective altruism philosophy and significant political donations.

The Illusion of Success

• ⚠️ Behind the scenes, Alameda Research was deeply intertwined with FTX, relying on customer deposits from the exchange to cover risky trading losses.
• 📉 Alameda's balance sheet was heavily propped up by FTX's illiquid FTT token, whose value was dependent on FTX itself, creating a fragile financial structure.

The Collapse Unfolds

• 🚨 In November 2022, a CoinDesk leak exposed Alameda's precarious balance sheet, leading Binance CEO CZ to announce liquidation of FTT holdings.
• 💸 This triggered a massive bank run on FTX, with customers attempting to withdraw over $6 billion, revealing an $8 billion hole in FTX's finances and forcing it to freeze withdrawals.
• 📉 FTX, Alameda, and over 100 affiliated companies filed for bankruptcy on November 11, 2022, leaving over 1 million creditors in limbo.

Aftermath and Legacy

• ⚖️ SBF was arrested in the Bahamas and extradited to the US, facing charges including wire fraud and money laundering, with key allies like Caroline Ellison and Gary Wang pleading guilty and cooperating.
• 🌍 The collapse caused widespread ripple effects across the crypto industry, leading to the downfall of other firms and becoming a cautionary tale about unregulated markets and blind trust.