FTX’s November 2022 implosion shocked the crypto world: a $32 billion cryptocurrency exchange collapsed in 10 days, exposing founder Sam Bankman-Fried’s fraud, customer fund misuse, and regulatory failures. The bankruptcy, arrest, and 2023 conviction became crypto’s Enron moment.
The Rise: 2019-2022
Sam Bankman-Fried (“SBF”) founded FTX in 2019, positioning it as trustworthy crypto exchange amid industry scandals. By January 2022, FTX reached $32B valuation with celebrity endorsements (Tom Brady, Gisele Bündchen, Larry David Super Bowl ad), sports stadium naming rights (Miami Heat), and effective altruism branding.
The House of Cards
FTX’s sister trading firm Alameda Research, also SBF-controlled, borrowed billions in customer deposits for risky trades. No separation existed between companies. When crypto winter hit 2022, Alameda faced margin calls on overleveraged positions secured by worthless FTT tokens (FTX’s native token).
The November 2-11 Death Spiral
November 2: CoinDesk leaked Alameda balance sheet showing $5B FTT holdings. November 6: Binance CEO announced selling FTT, triggering bank run. November 8: FTX halted withdrawals. November 9: Binance abandoned rescue. November 11: FTX filed bankruptcy, revealing $8B hole. SBF resigned.
Criminal Charges & Trial
December 2022: SBF arrested in Bahamas, extradited to U.S. Charged with wire fraud, money laundering, campaign finance violations. Trial revealed he spent customer funds on luxury real estate, political donations ($40M to Democrats), celebrity deals, and personal ventures. November 2023: Convicted on all counts, facing 25+ years prison.
Industry Fallout
FTX bankruptcy exposed contagion: BlockFi, Genesis, Voyager failed. Crypto credibility collapsed. Regulators intensified scrutiny. SBF transformed from effective altruist billionaire wunderkind to convicted felon in 12 months—fastest founder fall from grace in tech history.
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