The Shocking Collapse of FTX: The Closing Act

The Shocking Collapse of FTX: The Closing Act

In late 2022, Global RADAR chronicled the shocking fall of what was once the world’s most popular cryptocurrency exchange, FTX. Behind the organization’s demise was none other than founder and CEO Sam Bankman-Fried, also known as “SBF.” An eccentric individual once widely viewed as a rising star and a pioneer of sorts in the fintech space, SBF’s fall from grace came as swiftly as his company’s shuttering upon revelations that he had been operating a fraud scheme the likes of which had never been seen before. All told, FTX ultimately crashed on November 11, 2022, filing for Chapter 11 bankruptcy due to a lack of liquidity and the gross mismanagement of funds, leading to a mass exodus on behalf of unnerved investors. When the dust settled, nearly $8 billion in customer funds had been stolen and spent by SBF and other company executives. The developments ultimately sent the cryptocurrency sector into a downward spiral it is still working out of nearly a year later. Following an unsuccessful attempt to elude authorities by fleeing to the Bahamas, Bankman-Fried was ultimately arrested on December 12th, 2022 and extradited to the United States – later pleading ‘not guilty’ to multiple counts related to fraud and conspiracies, including wire fraud, securities and commodities fraud, and money laundering. In addition to the criminal charges, SBF also faces an additional set of charges in relation to alleged bribery, bank fraud and making illegal political campaign contributions valued at over $100 million collectively. A federal indictment levied over the summer accused the embattled mogul of leveraging his financial influence in order to lobby Congress and various regulatory agencies to support legislation and regulations that he believed would make it easier for FTX to continue to accept customer deposits and grow.1

The firm’s faltering was shocking to many in the cryptocurrency world given FTX’s relatively firm standing as among the most trusted names in the industry. Couple this with the fact that they had many prominent celebrity endorsements and backers of their brand and the firm’s legitimacy appeared to be unquestionable. All of the hype surrounding the platform caused the crypto exchange’s popularity with venture capitalists to skyrocket. FTX ultimately reached a peak value of $32 billion at the start of 2022, with all signs pointing upwards for the future of the company as mainstream investment into cryptocurrencies was continuing to grow at exponential rates in line with the company’s visibility expanding across the globe. Not many could have predicted that this would all come crashing down just a few short months later.

In the months since the grand unraveling, information has continued to be unveiled lending an eye to the state of the company’s rocky internal affairs and the sheer disorder seen from the corporate level downwards. Trial evidence has emerged that has all but confirmed the fact that FTX was created with the notion of being nothing more than a tool for what ultimately became the most far-reaching fraud scheme in American history. Bankman-Fried had already laid the groundwork for fraud back in 2017, two years before FTX was even founded. It was then that Bankman-Fried launched the hedge-fund-like crypto trading house Alameda Research, a sister-firm of FTX. Once FTX was ultimately launched in 2019, SBF ordered co-founder Gary Wang and CTO Nishad Singh to allow “special privileges” to Alameda. These privileges were not offered to other customers and included an unlimited line of credit that Alameda and its executives could use at any time. They were also allowed to have a negative balance without penalty – a luxury that no other FTX customer was allowed. The case exposed that SBF and his inner circle were moving clients’ funds without their knowledge to support their personal (and pleasurable) endeavors – essentially using their customers’ hard-earned money as their own personal ATM. Of course, they probably intended to return the money through Alameda’s profits so their customers would be none the wiser. However, they never got the chance to do so following FTX’s ultimate collapse.

Given the emotions tied to the case, the number of individuals affected by the wrongdoing, and even more damning evidence being released over the course of his five-week trial, the 31-year old Bankman-Fried faced an uphill battle to clear his name – efforts that ultimately fell upon deaf ears. After just over four hours of deliberation last Friday, the jury in the criminal trial found the FTX founder guilty on all seven counts of mismanaging billions of dollars’ worth of customer funds stored in his crypto exchange and ultimately defrauding investors in order to line his pockets and that of those close to him. This unprecedented saga now draws to a close nearly a year to the day of the company’s implosion.

In the end, it was Bankman-Fried’s own inner circle – the very individuals he sought to take care of via his fraudulent activity – that sealed his fate. SBF’s own ex-girlfriend (and former company CEO) took the stand against him as the prosecution’s star witness. Caroline Ellison testified that every decision made at both FTX and Alameda came from Sam Bankman-Fried himself.  Ellison was not the only snake in the grass for SBF, however. His two aforementioned cohorts, Gary Wang and Nishad Singh, both made deals with the U.S. government to throw Bankman-Fried under the bus in exchange for reduced sentences. All three ultimately said that Bankman-Fried directed them to commit fraud by helping to transfer billions of dollars in FTX customer funds to Alameda, an affiliated hedge fund 90%-owned by Bankman-Fried.3 All told, SBF now likely faces the remainder of his life behind bars as the charges levied can lead to a maximum sentence of 110 years in prison. While rather harsh for white-collar criminal activity, many analysts expect these terms to stick, with the acting federal judge on the case Lewis Kaplan likely seeking to set an example for other high-profile bad actors in the years to come.  SBF’s sentencing is set for March 28, 2024. 

As for the celebrity endorsers, insult was later added to the injury of losing out on their initial investments into the firm. Several of the group’s most prominent backers, a list that included big names such as NBA star Stephen Curry, former baseball hero David “Big Papi” Ortiz, basketball Hall-of-Famer Shaquille O’Neal, Seinfeld creator Larry David and Shark Tank’s Kevin O’Leary, were implicated in lawsuits for appearing in paid advertising campaigns and endorsing an exchange peddling unregistered securities.2 The chief complaint levied in February argued that the celebrities, in lending their credibility to the failed cryptocurrency exchange, were “responsible for the many billions of dollars in damages they caused.”2 The suit is now seeking billions of dollars’ worth of damages.


  1. Cohen, Luc. “Bankman-Fried Used $100 Mln in Stolen FTX Funds for Political Donations, US Says.” Reuters, Thomson Reuters, 15 Aug. 2023. 
  2. Redbord, Ari. “Tom Brady and Other A-Listers Sued for Fumbling FTX Endorsements.” Forbes, Forbes Magazine, 2 Feb. 2023. 
  3. Van Voris, Bob. “After Sam Bankman-Fried Guilty Verdict, What’s next for Caroline Ellison, Others.” Bloomberg.Com, Bloomberg, 3 Nov. 2023. 

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