FTX Trading Ltd.
The $8 Billion Crypto Fraud
Filed: November 11, 2022
FTX went from a $32 billion valuation to bankruptcy in 10 days. CEO Sam Bankman-Fried was convicted of seven counts of fraud and conspiracy for orchestrating one of the largest financial frauds in U.S. history. Customer funds were secretly transferred to Alameda Research, FTX's sister hedge fund, to cover losses.
The Numbers
Timeline of Collapse
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FTX founded by Sam Bankman-Fried and Gary Wang.
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FTX raises $900M at $18B valuation from Sequoia, SoftBank, Temasek, Paradigm.
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FTX raises $400M at $32B valuation. Super Bowl ads, stadium naming rights, celebrity endorsements.
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CoinDesk publishes Alameda Research balance sheet showing most assets are FTT tokens — FTX's own created token.
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CZ (Binance CEO) announces Binance will sell all FTT holdings (~$500M). Bank run begins.
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FTX halts withdrawals. $6B in customer withdrawals requested in 72 hours.
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FTX, Alameda Research, and 130+ affiliated entities file Chapter 11. SBF resigns.
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SBF sentenced to 25 years in federal prison. Ordered to forfeit $11 billion.
Root Cause Analysis
What actually killed FTX Trading Ltd..
- ▸ Commingling of customer deposits with Alameda Research trading funds
- ▸ FTT token used as collateral — circular self-created 'asset' with no real value underpinning
- ▸ No board of directors, no CFO, no audited financials — all financial decisions run through SBF personally
- ▸ Alameda given secret $65B line of credit from FTX customer funds with no oversight
- ▸ Venture capital FOMO: investors poured billions in without basic due diligence
Lessons Learned
What investors, executives, and regulators should take away.
- ! 'Don't use customer money to trade' is the oldest rule in finance for a reason
- ! If a company can't produce audited financials and doesn't have a CFO, walk away
- ! Self-created tokens as collateral = circular logic. Outside money must back liabilities.
- ! Celebrity endorsements and stadium names are not a substitute for corporate governance
Sources
All data sourced from public records. Verified against SEC filings and court documents.