The collapse of FTX, the world’s third-largest cryptocurrency exchange, took approximately ten days. On November 2, 2022, the cryptocurrency news outlet CoinDesk published a leaked balance sheet for Alameda Research, a hedge fund whose chief executive officer was technically separate from but functionally indistinguishable from FTX’s chief executive officer, Sam Bankman-Fried. The balance sheet revealed that Alameda’s assets consisted overwhelmingly of FTT, a token issued by FTX whose only meaningful function was to confer trading discounts on the exchange that had created it. The disclosure raised the obvious question of whether FTX itself was solvent. On November 6, the chief executive officer of Binance, Changpeng Zhao, announced via Twitter that Binance would be liquidating its FTT holdings. The announcement triggered a customer run on FTX. By November 8, withdrawals had been suspended. By November 11, FTX had filed for Chapter 11 bankruptcy in the District of Delaware. The estimated shortfall to customers was approximately $8 billion.
The fraud, as established in subsequent court proceedings, had been ongoing since at least 2019. Customer deposits at FTX, which the exchange’s terms of service had represented as held in segregated custody, had instead been routed to Alameda Research and used to fund speculative trading positions, venture capital investments, real estate purchases in the Bahamas, political donations to candidates in both major American political parties, and effective-altruism-themed philanthropy. The accounting infrastructure that would have detected this was, by the testimony of FTX’s restructuring chief executive officer John J. Ray III, worse than at any company he had ever encountered — and Ray’s prior assignments included Enron. There was no functioning treasury management. There was no risk control. There was a single shared password.
Sam Bankman-Fried — SBF, in the press shorthand — had been, in the eighteen months preceding the collapse, the most visible figure in cryptocurrency. He had appeared on the cover of Fortune magazine, testified before Congress, donated approximately $40 million to American political candidates in the 2022 cycle, and bought naming rights to the home arena of the National Basketball Association’s Miami Heat. His public persona — disheveled, brilliant, ostentatiously frugal, prone to sleeping on a beanbag in the office, professionally committed to effective altruism — had been calibrated to a specific media appetite of the moment. The collapse, when it came, recalibrated that appetite with great speed.
He was extradited from the Bahamas in December 2022, indicted on charges of wire fraud, securities fraud, commodities fraud, money laundering, and conspiracy to commit campaign finance violations. The trial began in October 2023 in the Southern District of New York. Three of his closest collaborators — Caroline Ellison, Gary Wang, and Nishad Singh — testified against him as part of cooperation agreements. The jury convicted him on all seven counts on November 2, 2023, exactly one year after the CoinDesk article that had begun the cascade. On March 28, 2024, Judge Lewis Kaplan sentenced him to twenty-five years in federal prison.
The cultural significance of FTX, distinct from its financial and legal dimensions, was that it produced — in real time, on the public internet, with documentary footage — the most thorough vindication ever recorded of a single bitcoin maxim. Not your keys, not your coins had been a slogan since Mt. Gox eleven years earlier. It became, after FTX, something closer to received wisdom. The roughly one million customers whose funds were trapped in FTX’s bankruptcy proceedings learned that lesson the way every previous generation of exchange customers had learned it. The bankruptcy estate has, as of 2025, been able to return substantial portions of customer assets, in part because the underlying cryptocurrency holdings appreciated significantly during the proceedings. The lesson, however, was independent of the recovery. The exchange, the fraud, and the prison sentence are now the standing example of what custody risk looks like when the custodian is sufficiently charming and the regulators are sufficiently slow.