FTX

» see ftx.com as it lived, on the wayback machine

~ the obit ~

ftx peaked when i was 38 and doing edge-ai work in ankara. i was not on crypto twitter. i watched the bankruptcy week the same way i watched lehman in 2008: from a chair, refreshing two threads at once.

sam bankman-fried and gary wang opened ftx in may 2019 out of hong kong, with sbf running an adjacent quant fund called alameda research at the same time. by january 2022 ftx had a $32 billion valuation and a million accounts, and its name was on a basketball arena in miami. in three and a half years sbf had become the kind of crypto founder who could buy a senator's evening and get a cover photo in fortune for it.

then on november 2 2022 coindesk published alameda's balance sheet. roughly $3.66 billion of it was ftt, the token that ftx itself issued. four days later changpeng zhao at binance said binance would sell its ftt holdings, which was a perfectly legal sentence that started a bank run. customers pulled $6 billion in 72 hours. on november 8 binance signed a letter of intent to rescue the exchange. binance backed out a day later, and on november 11 ftx filed chapter 11 in delaware with john ray III, the lawyer who had wound down enron, named ceo.

~ the rap sheet ~

~ how it landed ~

the trick that made ftx feel different from coinbase was that the exchange and the trading firm were not separate companies. alameda had a special line of credit on ftx of around $65 billion. it was funded with customer deposits that, on paper, were not supposed to leave the exchange. when those deposits left, alameda used them to make leveraged bets in 2022 that lost a lot of money during the spring crypto crash. the hole on the balance sheet was real long before november.

the other piece was the marketing. ftx took out a super bowl ad with larry david telling viewers not to trust new things. tom brady and gisele bündchen held equity, and kevin o'leary was on retainer. for a chunk of 2021 and 2022 ftx looked like the safe, regulated face of crypto, while internally the founder was running a different exchange in his head.

~ the day it died ~

november 11 2022 is the date on the chapter 11 filing. that night somebody drained around $473 million in crypto out of ftx wallets, in a hack that the new ceo described in court documents as "unauthorized transactions." nobody has definitively answered whether it was an inside job or an outside attacker who saw the door wide open.

sbf was arrested in the bahamas on december 12 2022 and extradited to the southern district of new york. his trial started a year later, with caroline ellison and gary wang flipping and testifying for the prosecution. the jury convicted on all seven counts in november 2023, and judge lewis kaplan sentenced him to twenty-five years.

~ what got buried with it ~

mt. gox in 2014 was the original lesson that nobody learned. ftx in 2022 was the same lesson, scaled to a name-the-arena budget and a senate hearings schedule. the bankruptcy estate eventually traced enough assets to repay most claimants at 2022 dollar values, which was both a happy ending for creditors and a quiet reminder that "we recovered the money" is not the same as "this should have happened."

the wider damage was political. sbf's washington lobbying budget went to zero overnight. the next round of crypto bills got drafted in the shadow of a courtroom photograph, not the shadow of a glossy hearing-room appearance. that part has not gone away.

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