The Rise and Fall of FTX: Sam Bankman-Fried's $8 Billion Heist

FTX's Meteoric Rise and Scandalous Fall

• 💸 On November 11th, 2022, FTX, a major cryptocurrency exchange, filed for bankruptcy, revealing an $8 billion disappearance of customer money.
• 🎭 Sam Bankman-Fried (SBF), the founder, was initially seen as a "responsible adult" in crypto and a self-proclaimed effective altruist, despite his company's rapid, almost "too meteoric" growth.
• 🏢 Behind the public image, FTX lacked proper corporate controls, with financial records kept on QuickBooks and no board of directors.

The Deceptive Connection: FTX and Alameda Research

• 🔗 FTX was intimately connected to Alameda Research, another company founded by SBF, sharing leadership and bank accounts.
• 🚫 Gary Wang, FTX's CTO, built "back doors" into FTX's code, allowing Alameda to borrow unlimited customer funds without collateral or margin calls.
• 💰 Alameda used these borrowed funds for risky crypto bets, venture capital, real estate, and political donations, including SBF becoming a major donor to Democratic candidates.

The FTT Token and Collapse Trigger

• 📉 The House of Cards was built on FTT, FTX's proprietary cryptocurrency token, which heavily loaded Alameda's balance sheet as "phantom wealth."
• 📰 The collapse began on November 2nd, 2022, when CoinDesk leaked Alameda's balance sheet, revealing its reliance on FTT tokens.
• 🚨 Binance CEO, Changpeng Zhao, announced the liquidation of Binance's FTT holdings, triggering a price crash and a customer run on FTX, which subsequently blocked withdrawals.

Legal Proceedings and Lessons Learned

• ⚖️ SBF was arrested in the Bahamas, extradited to the US, and charged with wire fraud, securities fraud, money laundering, and campaign finance violations.
• 🧑‍⚖️ After a month-long trial, SBF was found guilty on all seven counts on November 2nd, 2023, and sentenced to 25 years in federal prison.
• ✅ The bankruptcy estate has recovered approximately $16 billion in assets, potentially enough to repay customers in full, highlighting the scandal as theft, not a market crash.
• 🔑 The key lesson is to "trust, but verify," emphasizing that reputation means nothing without transparency, and to be wary if something "seems too good to be true."