The FTX Collapse

In November 2022, FTX — the world’s second-largest cryptocurrency exchange, valued at $32 billion just months earlier — collapsed in three days.

Sam Bankman-Fried, its founder, had been one of the most prominent figures in the crypto world. He was on the cover of magazines. He donated to political campaigns. He testified before Congress. He was considered one of the most credible voices for responsible crypto regulation.

Behind the scenes, customer funds held at FTX had been used by Alameda Research — a trading firm Bankman-Fried also controlled — to make speculative bets, fund investments, and cover losses. Billions of dollars of customer deposits were gone.

When a competitor published data suggesting Alameda’s precarious financial position, users began withdrawing. Within 72 hours, FTX had a hole of approximately $8 billion it couldn’t fill. It filed for bankruptcy. Withdrawals were frozen. Customers discovered their funds were gone.

Sam Bankman-Fried was arrested in December 2022 and extradited to the United States. He was convicted on seven counts of fraud and conspiracy in November 2023 and sentenced to 25 years in prison.

The FTX collapse left an important contrast standing in plain sight.

Satoshi’s Bitcoin — held transparently on a public blockchain, with rules nobody could change, with no CEO and no possibility of misappropriation — had been running for thirteen years without a single instance of theft at the protocol level.

FTX lasted nine years before its founder stole the customers’ money.

The creator who disappeared left behind something trustworthy. The founder who stayed took everything.

Tomorrow: what FTX taught the world — again.

— The Daily Bit