FTX Collapse: How Sam Bankman-Fried Stole $8 Billion in Customer Funds

Jun 10, 2025 · 14 min read

The collapse of FTX in November 2022 was the most devastating event in crypto history. The world's second-largest exchange — valued at $32 billion — disintegrated in less than a week when founder Sam Bankman-Fried (SBF) was revealed to have funneled $8 billion in customer deposits to Alameda Research.

The Rise of FTX

SBF, an MIT graduate, launched FTX in 2019. It grew through celebrity endorsements (Tom Brady, Steph Curry) and innovation. At peak, FTX was valued at $32 billion and SBF's fortune at $26 billion. He promoted “effective altruism” while secretly committing massive fraud.

How the Fraud Worked

Customer deposits were secretly transferred to Alameda Research to cover trading losses, real estate, and political donations. The FTT token created dangerous circularity — FTX's health depended on FTT value, and FTT depended on FTX. Former CEO Caroline Ellison testified Alameda borrowed $14 billion from FTX.

The Collapse: 5 Days

Nov 2: CoinDesk revealed Alameda's FTT-heavy balance sheet. Nov 6: Binance CEO CZ announced selling all FTT. Nov 8: FTX halted withdrawals. Nov 11: FTX filed bankruptcy. John J. Ray III called it “worse than Enron.”

Trial & Conviction

SBF was found guilty on all 7 counts in November 2023. Sentenced to 25 years in federal prison in March 2024.

Red Flags

1. No board or auditors. 2. Alameda conflict of interest. 3. FTT concentration risk. 4. Opaque finances. 5. “Not your keys, not your coins” — keep crypto in self-custody.