The story of the collapse of FTX: From the top to bankruptcy in days!
FTX was one of the largest cryptocurrency trading platforms in the world, but it collapsed suddenly in November 2022, resulting in billions of dollars in losses and a significant shock to the crypto market. Here is the full story:
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1. The rise of FTX: A powerful platform and a genius founder
FTX was founded in 2019 by Sam Bankman-Fried, a young American who became famous for his trading acumen.
FTX quickly became one of the largest cryptocurrency platforms thanks to its advanced features, high liquidity, and major sponsorship deals (such as agreements with the NBA and partnerships with celebrities).
Its value reached $32 billion in 2022, and Sam Bankman-Fried was considered the 'crypto genius' and the 'new Warren Buffett'.
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2. The beginning of the collapse: Leaks and suspicious financial reports
In November 2022, a news report revealed that a large portion of Alameda Research's (an investment firm owned by Bankman-Fried) assets consisted of FTT, the native token of FTX.
This raised fears that FTX was illegally using customer funds to support Alameda.
Binance, FTX's largest competitor, announced that it would sell all FTT tokens it owned, leading to a state of panic.
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3. The platform's collapse in a matter of days
Once the news spread, customers began withdrawing their funds from FTX at a rapid pace, leading to a severe liquidity crisis.
Within 72 hours, more than $6 billion was withdrawn, and FTX was unable to meet these requests.
On November 11, 2022, FTX officially declared bankruptcy, and the value of FTT dropped from around $25 to under $1.
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4. Theft of $400 million after bankruptcy
Hours after filing for bankruptcy, the platform suffered a mysterious hack, and approximately $400 million was stolen from its wallets.
The perpetrator has not been identified to this day, and there are speculations that the hack may have been from an 'internal source'.
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5. The arrest and trial of Sam Bankman-Fried
In December 2022, Bankman-Fried was arrested in the Bahamas and then extradited to the United States on charges of financial fraud and money laundering.
In his trial in 2023, it was proven that he used customer funds to finance Alameda, invest in real estate, and make political donations.
In March 2024, he was sentenced to up to 25 years in prison for his involvement in the largest fraud scandal in cryptocurrency history.
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The results and impact on the crypto market
The collapse of FTX resulted in massive losses for investors, with millions of users losing their money.
The event caused a decline in investor confidence in cryptocurrencies and led to tightening regulations worldwide.
The crypto market continued to be affected by the crisis, but slowly began to recover with the entry of new institutions.
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Conclusion: A harsh lesson for the crypto market
The collapse of FTX was one of the largest scandals in cryptocurrency history, highlighting the dangers of a lack of transparency and poor management in this market. Many victims are still waiting for compensation, but the story will remain a warning to investors about the need for caution in the crypto world.
