How Sam Bankman-Fried Stole $3 Billion: The Rise and Fall of FTX

The Rise of FTX and Sam Bankman-Fried

• 💡 Sam Bankman-Fried (SBF), an MIT math genius and former Wall Street trader, founded FTX in 2019, aiming to create a reliable and professional cryptocurrency exchange.
• 🚀 FTX quickly became a trusted platform, handling billions daily, endorsed by celebrities and major sports leagues, and positioning SBF as the "golden boy" of crypto.
• 💰 SBF promoted effective altruism, claiming he would donate 99% of his wealth, which helped build his public image as a responsible figure in the crypto world.

The Intertwined Empires: FTX and Alameda Research

• 🧩 SBF also ran Alameda Research, a quantitative trading firm he founded before FTX, which supposedly generated billions through market-making and arbitrage.
• ⚠️ Despite being presented as separate entities, the "thick wall" between FTX and Alameda was merely "made of paper", allowing for secret transactions and financial entanglement.

Misappropriation of Customer Funds

• 📉 Following a major crypto market crash in May 2022, Alameda Research began hemorrhaging money due to failed algorithmic strategies and massive borrowed funds.
• 💸 SBF made the critical decision to secretly use FTX customer funds to cover Alameda's mounting losses, escalating from millions to over $8 billion.
• 🤫 This was rationalized internally as temporary "cash flow management" between his companies, despite FTX effectively becoming technically bankrupt.

The Unraveling and Collapse

• 🚨 Internal accounting discrepancies were noticed by FTX employees, but concerns were dismissed, and dissent was discouraged within the company culture.
• 📊 A leaked balance sheet in October 2022 revealed Alameda's assets were primarily FTT tokens, FTX's own cryptocurrency, signaling a massive red flag of circular accounting.
• 💥 Binance CEO Changpeng Zhao's announcement to sell FTT tokens triggered a market panic, leading to a rapid crash in FTT prices and a rush of customer withdrawals from FTX.
• 📉 Within 72 hours, FTX filed for bankruptcy, unable to meet withdrawal demands, leading to billions in losses for investors and pension funds.

Aftermath and Lessons Learned

• ⚖️ Sam Bankman-Fried was convicted of fraud and conspiracy and sentenced to 25 years in federal prison for orchestrating one of the largest financial crimes in American history.
• 🔑 The FTX collapse serves as a stark reminder that trust in finance is fragile, and warning signs like promises of "too good to be true" returns and lack of transparency should not be ignored.