AZnomicsThe FTX Collapse
The second-richest person under 30 in the world — built on stolen money
"Sam Bankman-Fried was on the cover of Forbes, Fortune, and GQ. He was arrested in the Bahamas three months later."
FTX was the world's second-largest cryptocurrency exchange. Its founder, Sam Bankman-Fried, was worth $26 billion on paper, donated millions to political causes, testified before Congress as a responsible voice for crypto regulation, and was celebrated as a visionary. In November 2022, it took 72 hours for the entire thing to collapse — revealing that customer funds had been stolen and used for speculative investments by Bankman-Fried's trading firm.
FTX and Alameda Research — a trading firm also run by Bankman-Fried — were supposed to be separate. FTX was a customer-facing exchange where people deposited crypto to trade. Alameda was a proprietary trading operation. In reality they shared the same balance sheet. Customer deposits at FTX were being used by Alameda to make leveraged bets on crypto markets. When those bets went bad, the customer money was gone.
A leaked document showed Alameda's balance sheet was mostly FTX's own token — essentially worthless paper used to back real customer deposits. Binance's CEO tweeted he was selling his FTX tokens. Customers rushed to withdraw. FTX had $900 million liquid against $9 billion in withdrawal requests. Trading was halted. Bankman-Fried tweeted "FTX is fine." It was not fine. The next morning FTX filed for bankruptcy. $8 billion in customer funds had vanished.
Bankman-Fried's defence was that he made accounting mistakes — that it was incompetence, not fraud. His own co-founders testified against him. Caroline Ellison, who ran Alameda and was Bankman-Fried's girlfriend, told the jury exactly how the scheme worked. The jury deliberated for four hours. He was convicted on all seven counts of fraud and conspiracy. Sentenced to 25 years. The crypto industry's Enron moment had arrived.
FTX is the oldest story in finance told with new technology. "Not your keys, not your coins" — if you don't hold the asset yourself, you're trusting someone else to hold it honestly. Custody, segregation of client funds, and independent auditing exist for a reason. Every generation has to relearn this.