NIGHTEYE

THE FALL OF FTX: THE BIGGEST CRYPTO SCANDAL IN HISTORY

Introduction

In November 2022, the collapse of FTX, a major cryptocurrency platform, sent shockwaves through the crypto industry and the broader financial world. The platform's founder and CEO, Sam Bankman-Fried, was charged with financial crimes and campaign finance violations including wire fraud and money laundering. What happened at FTX stands as one of the most dramatic failures in financial history, exposing deep vulnerabilities in the cryptocurrency industry.

The Rise of FTX

Before its implosion, FTX was a powerhouse in the cryptocurrency world. The platform was known for its user-friendly interface and quickly rose in prominence, growing from $20 million in revenue in 2019 to $1 billion in 2021. The exchange became the third-largest cryptocurrency trading platform by volume and served over one million users worldwide.

FTX's meteoric rise was fueled by aggressive marketing. The company secured naming rights to Miami Heat's arena, ran Super Bowl advertisements, and enlisted celebrity endorsers including sports figures and entertainment personalities. This marketing blitz created an image of a trustworthy, well-managed platform backed by serious money.

How the House of Cards Collapsed

The Trigger: November 2, 2022

On November 2, 2022, CoinDesk published an article revealing that Alameda Research, a crypto hedge fund owned by Sam Bankman-Fried, held a significant amount of $FTT , a token created by FTX. Because FTT cannot be easily exchanged for cash, the report stoked fears about the capital reserves at Alameda Research and thus FTX.

This single article exposed the intertwined nature of FTX and Alameda Research, raising immediate red flags about the safety of customer funds.

The Bank Run

In response to the CoinDesk report, Changpeng Zhao, CEO of rival crypto exchange Binance, announced he would sell all the company's FTT holdings worth $580 million. This major exit from a crypto heavyweight triggered a wider selloff, placing immense pressure on FTX to meet sudden customer withdrawal demands.

The withdrawal requests cascaded rapidly. In a single day, FTX lost billions of dollars as customers rushed to withdraw their funds. On November 8, FTX blocked customers from taking money out by removing that option online, leaving hundreds of thousands without access to their assets.

The Fraud Exposed

According to SEC complaints, Sam Bankman-Fried orchestrated years of fraud by diverting investor funds to his private hedge fund, which used those funds for venture investments, lavish real estate purchases, and large political donations. Bankman-Fried had systematically stolen customer deposits to cover risky trades and personal expenses.

The Bankruptcy and Legal Aftermath

On November 11, 2022, FTX, Alameda Research, and over 100 affiliated entities filed for Chapter 11 bankruptcy protection. Bankman-Fried resigned as CEO and was replaced by John J. Ray III, a bankruptcy specialist best known for overseeing the liquidation of Enron.

Ray's assessment of FTX was damning. Ray stated: "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information."

Criminal Charges and Conviction

On November 2, 2023, Bankman-Fried was found guilty on seven federal counts including wire fraud conspiracy, wire fraud, conspiracy to commit money laundering, conspiracy to commit commodities fraud, and conspiracy to commit securities fraud.

On March 28, 2024, Bankman-Fried was sentenced to 25 years in prison and ordered to pay $11 billion in forfeiture. Key executives including Caroline Ellison and Gary Wang also pleaded guilty to their roles in defrauding customers.

The Scope of the Fraud

The scale of FTX's collapse was staggering. The collapse exposed an $8 billion hole in FTX's accounts, with FTX owing about $11.2 billion to its creditors and holding an estimated $14.5 to $16.3 billion in assets for distribution.

Additionally, approximately $473 million in funds were later taken from FTX in an "unauthorized transaction" as the platform's security was breached.

Market-Wide Impact

The collapse of FTX sent ripples throughout the crypto ecosystem and beyond. Other cryptocurrency lending platforms like BlockFi, Celsius Network, and Voyager Digital also filed for bankruptcy, directly related to their exposure to FTX and affiliated entities.

As news of FTX's collapse emerged in early November 2022, cryptocurrencies experienced significant declines in value. Tether dropped below its $1.00 peg to $0.97, and Bitcoin sank to its lowest price in two years, triggering institutional skepticism about cryptocurrencies as an asset class.

The Recovery Effort

Despite the massive fraud, there has been good news for affected customers. FTX is planning to send out about $1.6 billion to creditors starting on September 30, 2025, as part of its bankruptcy plan. The FTX repayment process relies on over $15 billion in recovered assets, including sales of stakes in companies like Anthropic and Robinhood.

A Delaware bankruptcy judge approved FTX's reorganization plan in October 2024, which will give 98% of FTX's creditors 119% of their allowed claims as of November 2022—meaning many customers will actually recover more than they originally lost.

Lessons for the Industry

The FTX collapse revealed critical vulnerabilities in cryptocurrency regulation and corporate governance. FTX operated in the Bahamas and sidestepped many regulatory requirements imposed by U.S. authorities. As an offshore company, FTX avoided rigorous financial reporting standards and investor protections that likely would have exposed its commingling of funds earlier.

The scandal has prompted calls for stronger regulation. U.S. Senator Elizabeth Warren noted that the FTX collapse "shows crypto may be more integrated into the banking system than regulators are aware," pushing for regulators to examine links between cryptocurrency firms and banks.

Conclusion

The FTX collapse stands as a watershed moment for the cryptocurrency industry. What began as a platform promising innovation and disruption of traditional finance ended in one of the largest financial frauds in history. Federal prosecutors described it as "one of the biggest financial frauds in American history," comparable to the Enron scandal and Bernie Madoff investment scheme.

While the recovery effort offers hope for affected customers, the FTX collapse has left lasting scars on the crypto industry's reputation and highlighted the urgent need for better regulation, corporate governance, and investor protections. As the industry moves forward, the lessons learned from FTX will likely shape cryptocurrency regulation for years to come.

Article Date: February 10, 2026

Based on: Public filings, court documents, and news reports through late 2025

@CZ
#FTX

Complete Guide to the Fully Homomorphic Encryption Token

📊 QUICK STATS

Current Price: $0.0257 USDT (as of Feb 10, 2026) 📉

24h Change: -5.13% 🔴

All-Time High: $0.0403 (Feb 2, 2026) 📈

Current Drawdown: -36.2% from ATH ⬇️

Market Cap: ~$56-71 million 📋

24h Trading Volume: $145-396 million 💰

Token Launches: February 2-3, 2026 ✅

🎯 WHAT IS ZAMA?

The Mission 🎓

Zama is a cryptography company building state-of-the-art Fully Homomorphic Encryption (FHE) solutions for blockchain. 🔐
In simple terms: Zama lets you compute on encrypted data without ever revealing what the data is. 🧮➡️🔒
What Problem Does It Solve? 🤔

The Privacy Problem:
Bitcoin: Everyone sees every transaction 👀Ethereum: Every wallet balance is public 📊DeFi: All trading amounts visible 💸This is terrible for:
Banks (need confidentiality) 🏦Enterprises (need privacy) 🏢Individuals (want privacy) 👤Traders (don't want front-running) 🎲
Zama's Solution:
Enable confidential smart contracts and encrypted asset flows on existing blockchains. ✅
Why FHE? ⚙️
Fully Homomorphic Encryption means:
✅ Encrypt data✅ Send it to someone✅ They compute on it (without decrypting!)✅ Return encrypted result✅ You decrypt and see answer✅ Nobody ever saw the original data 🤐

This is the "holy grail" of cryptography. 🏆

🏛️ THE TEAM & FUNDING
Who Founded Zama? 👥
Dr. Rand Hindi - CEO 🎯
Entrepreneur and cryptography deeptech investorFounded Snips (acquired by Sonos)Partner at Unit.vcAdvised French government on AI & PrivacyBiohacker ranking in top 5%
Dr. Pascal Paillier - CTO 🔐
Pioneer of FHE and cryptographyInvented Paillier encryption scheme (widely used today)Led cryptography at Gemalto2025 IACR fellowPublished dozens of papers on cryptography

Prof. Nigel Smart - Chief Academic Officer 🎓
Leading cryptography researcherMultiple publications on FHE
Other notable investors: Gavin Wood, Juan Benet, Anatoly Yakovenko 💎
Funding History 💰
Total Raised: $229+ million 📊
Series A (March 2024): $73 million 💵
Led by Multicoin Capital and Protocol Labs Top-tier crypto infrastructure investors
Series B (June 2025): $57 million 💵
Led by Pantera CapitalMajor crypto VCs
Public Auction (Jan 2026): $118.5 million 💵
11,000+ unique biddersFirst encrypted ICO on Ethereum (using Zama's own FHE!)Total Value Shielded: $121 million
Other backers:Blockchange VenturesStake Capitala16z CryptoCoinbase VenturesAll major crypto VCs backing privacy infrastructure
💡 THE TECHNOLOGY: HOW ZAMA WORKS
The Concept: "HTTPS for Blockchain" 🌐
Just like HTTPS encrypts data in transit on the internet, Zama encrypts smart contract data on blockchain. 🔒
The Architecture 📐
Zama = Cross-Chain Confidentiality Layer
NOT
❌ A new blockchain (L1)❌ A Layer 2❌ A sidechain
IS
✅ Sits on top of Ethereum, Polygon, etc.
✅ Doesn't require bridging to new chain✅ Users stay on their preferred blockchain✅ Add privacy without changing chain
Key Technical Features 🔧
1. Programmable Confidentiality 🎮
Smart contracts define WHO can decrypt WHATDevelopers have full controlDifferent rules per applicationNot one-size-fits-all
2. Cross-Chain Composability 🔗
Confidential contracts interact with each otherAlso compose with non-confidential contractsFull ecosystem integrationDeFi x Privacy
3. 128-Bit Security 🛡️
Protects against all known cryptographic attacksIncluding quantum computer attacksEnterprise-grade securityFully audited
4. Operator Network 🌐
Decentralized operators run the networkOperators stake ZAMA tokensReceive staking rewards (5% inflation initially)Rewards distributed by role and stake
🪙 TOKEN MECHANICS & ECONOMICS
ZAMA Token Utility 🎫
1. Encryption/Decryption Payments 💸
Users pay ZAMA for encryption and decryption operationsAll fees are burned (deflationary!)Creates fee burn mechanism
2. Operator Staking 🏆
Operators stake ZAMA to participateReceive rewards for securing networkSquare root of stake distribution (prevents concentration)Delegators can earn from operators
3. Governance
Token holders vote on protocol changesEmission rate changesParameter updatesCommunity-driven decisions
Token Distribution 📊
Total Supply: 11 billion ZAMA tokens 🎯
Distribution Breakdown:
Series A & B investors: ~45%Core team: ~20%Ecosystem incentives: ~25%
Public allocation: ~10% (rare for big projects!)
Public Sale Price: $0.05 USDT 💵

Current Price: $0.0257 USDT 📉

Discount: 48.6% below public sale price ⬇️
Emission Schedule ⏱️
Initial inflation: 5% per year 📈
Can be changed via governance vote.
Designed to:

Reward early operatorsBootstrap network participationEventually decrease as network matures
📈 PRICE HISTORY & MOMENTUM
Launch Phase (Feb 2-3, 2026) 🚀
Opening price: ~$0.0403 (auction clear price) 📊

This was ATH immediately
Why?
✅ Hype from encrypted auction✅ Major VC backing✅ First FHE token launched✅ Massive media attention
Post-Launch (Feb 4-10, 2026) 📉

Current price: $0.024

Decline: -36.2% from ATH

Duration: 8 days
Why the selloff?
❌ Token unlock pressure (major unlock Feb 5)❌ Public sale price was $0.05 (way above launch)❌ Buyers underwaterimmediately❌ Profit-taking from auction winners❌ Market volatility (broader crypto down)
Interesting Price Action 🔄
Feb 6 Rally: +18% despite Bitcoin down 8%! 📈
Counter-trend moveStrong independent buyingLow liquidity = high volatilityTypical for new token
Key Resistance: $0.05 (public auction price) 🎯

Key Support: ~$0.02-0.025 (current levels) 🔻
✅ THE BULL CASE FOR ZAMA

Reason 1: Technology Moat 🏰
Only company doing FHE at production scaleYears ahead of competitorsProprietary optimizationsHard to replicate
Reason 2: Institutional Backing 💼
Every major crypto VC backing the projectMulticoin, Pantera, a16z, Coinbase VenturesNot just hype; real builders believe in it$229M+ raised = serious commitment
Reason 3: Privacy is "Table Stakes" 📊
SEC, banks, enterprises all need privacyFTX regulation = privacy becoming criticalInstitutional adoption impossible without privacyZama = only viable FHE solution
Reason 4: Mainnet Roadmap 🗺️
Testnet already live with developer adoptionv0.9 update released (enterprise-grade decentralization)Mainnet launch coming (Q1-Q2 2026 likely)Each milestone = catalyst
Reason 5: Fee Burn Mechanism 🔥Every transaction burns ZAMADeflationary pressurAs adoption grows, burn acceleratesSupply tightens over time
Reason 6: Staking Economics

5% annual staking rewardOnly available to operatorsCreates demand for ZAMA tokensIncentivizes long-term holding
Reason 7: Use Cases Are Massive 🚀
Confidential DeFi:

Private trades without front-runningEncrypted lending without exposure
Private Payments:
USDC transfers with hidden amountsBanking on blockchain
Sealed Auctions:
Fair price discovery without bids being publicZama's public token auction proved it works!
Enterprise Data:
ML on sensitive dataMedical records processingFinancial data protection
⚠️ THE BEAR CASE FOR ZAMA
Risk 1: Regulatory Uncertainty ⚖️
Privacy tokens under increasing scrutinyCould face restrictions in major jurisdictionsStablecoins + privacy = regulatory landmineGovernment crackdown possible
Risk 2: Computational Overhead 🐌
FHE is computationally expensiveEncrypted transactions slower than plainRequires optimization for scaleHardware acceleration needed eventuallyNot solved yet
Risk 3: Competition From MPC/ZK 🏁
Multi-Party Computation getting betterZero-Knowledge Proofs improvingOther privacy solutions emergingZama must stay ahead technologically
Risk 4: Token Unlock Schedule 📅
Major unlocks coming throughout 2026Investor tokens vestingCould create constant selling pressurePrice suppression likeFeb 5 unlock caused first major drop
Risk 5: Adoption is Unproven 🤷
Tech works, but are people using it?On-chain metrics (TVL, transactions) still lowNeeds killer app(s)Enterprise adoption takes timeEarly stage = high execution risk
Risk 6: Valuation Questions

Raised at $1B+ FDV (Series B)Public auction at $55M FDV (massive haircut!)Current ~$56M market cap (below auction)Valuation disconnect = market skepticismMay go much lower
Risk 7: Team Dependency

Highly dependent on Rand Hindi, Pascal PaillierIf they leave, risk significantly increasesNot yet a mature, institutional companyStill in "founder-led" stage
📊 TECHNICAL ANALYSIS: WHAT'S NEXT
Current Chart Pattern
Bearish Setup:

✅ Price below all major EMAs✅ All EMAs in downtrend✅ Lower highs, lower lows✅ No bullish signs yet

Oversold Conditions:

RSI would suggest potential bounceBut no strong support formingSelling continues despite bounce attempts
Key Price Levels 🎯
Resistance Levels:

🔴 $0.05 (public auction price) - MAJOR🟡 $0.04 (ATH) - Psychological🟡 $0.035 (Feb 6 bounce top)
Support Levels:

🟢 $0.025 (current area)🟢 $0.02 (Feb 9 low)🟢 $0.015 (psychological round number)

Scenarios 🔮
Bear Scenario (60% probability): 📉
Continues down to $0.015Unlock pressure continuesAdoption metrics disappointTrading below public sale for months
Base Scenario (30% probability): 📊
Stabilizes at $0.025-0.035Bounces intermittentlySlow uptrend as mainnet approachesTakes 6+ months to reclaim $0.05
Bull Scenario (10% probability): 🚀
Sudden mainnet catalystViral adoption announcementFounders do major mediaClimbs to $0.10+ quicklyRisky bet
💡 INVESTMENT PERSPECTIVE
Who Should BUY? ✅
✅ Long-term crypto believers (5+ year horizon)✅ Privacy enthusiasts (ideological buy)✅ Institutional adoption believers✅ FHE technology researchers✅ Only with capital you can afford to lose
Who Should AVOID? 🚫
❌ Short-term traders (too volatile, unlisted)❌ Risk-averse investors (early stage, unproven)❌ Need money soon (locked up for years)❌ Can't handle 50%+ drawdowns❌ Regulatory-sensitive investors
Price Targets (Speculative) 🎯
Bear Case: $0.010 (next 6 months)

Base Case: $0.050 (12-18 months)

Bull Case: $0.15-0.30 (2-3 years)
These are NOT predictions. Just scenarios.

🚀 CATALYSTS TO WATCH
Near-Term (1-3 months) ⏱️
✅ Mainnet launch date announcement✅ First developer milestones✅ Enterprise partnership (Upbit rumored)✅ Token unlock completion
Medium-Term (3-6 months) 📅✅ Mainnet launch✅ First major dApps launching on Zama✅ Regulatory clarity✅ Major exchange listings (Upbit, Coinbase mentioned)
Long-Term (6-24 months) 🔮
✅ 1st billion dollars TVS (Total Value Shielded)✅ Institutional adoption✅ Banking partnerships✅ Zama becoming industry standard
📱 HOW TO BUY
Exchanges Listing ZAMA
Major:
Binance ✅OKX ✅Bybit ✅KuCoin ✅
Professional:
Phemex ✅Kraken (rumors)Coinbase (rumors)
Rumored Upcoming:
Upbit (mentioned repeatedly)Crypto.comGemini
Trading Pair
ZAMA/USDT is primary pair across all exchanges
Where to Store
Hardware wallet (Ledger, Trezor) - Best for long-term ✅CEX (Binance, Kraken) - Easier for trading ✅Self-custody (MetaMask) - Own your keys ✅

DO NOT leave significant amounts on CEX long-term

🎯 FINAL VERDICT
Is ZAMA Worth Buying? 🤔
Short answer: Maybe, depending on your timeline.
For what it's worth:
PROS:
✅ Revolutionary technology (FHE)✅ Massive VC backing✅ Large addressable market (privacy)✅ Institutional tailwinds✅ Down 48% from public sale (entry point)

CONS:
❌ Unproven adoption❌ Regulatory risk❌ Token unlock pressure❌ High technical complexity❌ Early stage execution risk
My Take 💭
Zama is a 5-year bet on privacy infrastructure, not a 5-minute trade.
If you believe:
Privacy will become critical ✅FHE is the solution ✅Zama executes well ✅Then $0.025 is a decent entryIf you need money in 1-2 years, do not buy.
If you can't handle 70% drawdowns, do not buy.
If you believe in the vision, size your position appropriately and forget about it for 2+ years.

🔐 CONCLUSION
Zama represents the next frontier in blockchain infrastructure: privacy that doesn't compromise decentralization. 🌐
It's a technological marvel. The team is world-class. The backing is institutional. 💼
But it's early. Very early. Adoption unproven. Regulatory path unclear. 🛣️
This is a venture capital bet disguised as a token. 💰
$ZAMA , $ZEC ,
$ETH

Trade accordingly. 📊
Article Date: February 10, 2026

Disclaimer: Not financial advice. DYOR. ZAMA is highly experimental. 🚨
#ZAMA #Privacy #FHE #Crypto #Blockchain 🔐