FTX, once the world’s third-largest cryptocurrency exchange with more than one million users, collapsed in November 2022 after customers sought roughly $6 billion in withdrawals. A November 2, 2022, CoinDesk report revealed that Alameda Research—founded and majority-owned by FTX chief executive Sam Bankman-Fried—held a large share of its assets in FTX’s own FTT token. The disclosure exposed the fragility of the companies’ finances. FTX reportedly owed customers as much as $8 billion while holding only about $900 million in liquid assets, $5 billion in less-liquid assets, and $3.2 billion in illiquid private-equity investments. John J. Ray III later described the business as having an unprecedented failure of corporate controls and financial information.
According to testimony and reporting cited in the source, FTX transferred customer deposits to Alameda to fund investments and repay loans, despite the exchange’s terms of service prohibiting that use. Alameda also allegedly received a secret exemption from FTX’s automatic liquidation system, while internal software concealed the misuse of funds. On November 11, FTX, Alameda, FTX US, and more than 100 affiliates filed for bankruptcy; Bankman-Fried resigned and was replaced by Ray. Executives Caroline Ellison, Gary Wang, and Nishad Singh pleaded guilty and testified in October 2023 that Bankman-Fried directed the fraud. A federal jury convicted him on November 2, 2023, and prosecutors called the case one of the largest financial frauds in American history. The collapse triggered investigations, creditor losses, and failures across the cryptocurrency sector.
