FTX wasn’t just another crypto exchange. At its peak, it was the fourth-largest in the world, with $15 billion in daily trading volume, a $18 billion valuation, and a flashy name on the Miami Heat’s arena. It had futures trading, leveraged tokens, prediction markets, and even tokenized stocks. But by November 2022, it was gone. Not just shut down - collapsed. And $8 billion in customer money vanished with it.

How FTX Grew So Fast

FTX launched in May 2019 by Sam Bankman-Fried. It didn’t start big. But it moved fast. It offered features no other exchange had at the time: futures settled in stablecoins (not BTC or ETH), which made margin trading cheaper and simpler. It had index futures like the "Shitcoin Index" and "Altcoin Index" - letting traders bet on entire crypto sectors instead of single coins. It even had "Move contracts," letting you bet on whether a coin would rise or fall by a certain amount within a time window.

Its native token, FTT, gave users discounts on trading fees and voting rights on platform changes. That made FTT valuable. And that’s where things got dangerous.

FTX wasn’t just an exchange. It was tied to Alameda Research, a crypto trading firm also run by Bankman-Fried. Alameda used FTT as collateral for billions in loans. That meant if FTT’s price dropped, Alameda would be in trouble. And if Alameda got in trouble, FTX would be too - because they weren’t separate. They were one company with two names.

The Fatal Flaw: No Separation Between Customer Funds and Corporate Cash

This is the core lesson of FTX: if you can’t prove your customers’ money is safe, it’s not safe.

FTX claimed to store customer funds in cold wallets - offline, secure, untouched. It said it had insurance. It even had a "proof-of-reserves" system, which sounds good - until you realize it was just a self-reported spreadsheet.

The truth? Customer deposits were being moved directly to Alameda Research’s accounts. Not loaned. Not borrowed. Stolen. Alameda used those funds to make risky trades, buy real estate, donate to politicians, and fund lavish lifestyles. Bankman-Fried reportedly spent $10 million on a private jet. He also gave $100 million in campaign donations.

When CoinDesk published a leaked balance sheet on November 2, 2022, showing Alameda had $9 billion in liabilities and only $900 million in assets - with most of it in FTT - panic hit. FTT’s price started falling. Customers rushed to withdraw. FTX didn’t have the cash. It couldn’t cover even 10% of the withdrawals.

The Collapse: 72 Hours That Changed Crypto

On November 8, 2022, Binance announced it was buying FTX to save it. That should’ve been a lifeline. Instead, it was the final nail. Within 24 hours, Binance backed out after seeing more evidence of fraud.

FTX then blocked all withdrawals. No more "withdraw" button. No more access. The website said: "We’re having technical difficulties."

On November 11, FTX filed for Chapter 11 bankruptcy. That same day, hackers drained over $600 million from FTX wallets - not because of a hack, but because the exchange had already emptied its own accounts. FTX posted on Telegram: "FTX has been hacked. FTX apps are malware. Delete them." By then, over 1 million users had lost money. The average account held $15,000. Total losses: $8 billion.

What Happened After the Collapse

The fallout was global.

- Bitcoin dropped to $15,592 - its lowest in two years.

- BlockFi, a crypto lender, filed for bankruptcy days later.

- FTX’s U.S. arm, FTX.US, shut down too.

- The Miami Heat arena was renamed. The Formula 1 sponsorship was canceled.

- The U.S. Securities and Exchange Commission charged Bankman-Fried with wire fraud, securities fraud, money laundering, and conspiracy.

- Caroline Ellison, former CEO of Alameda, pleaded guilty in December 2023.

- Bankman-Fried was sentenced to 25 years in prison on March 28, 2024.

The bankruptcy trustee has recovered $16 billion in assets - from crypto holdings to real estate to NFTs. But only a fraction of that will go to customers. Estimates suggest users might get back 20% to 40% of what they lost. The rest goes to creditors, lawyers, and regulators.

What FTX Got Right - Before It All Fell Apart

Let’s be fair: before the fraud, FTX had strengths.

- Its trading interface was clean and powerful, with advanced order types like limit, stop-limit, and trailing stops.

- Fees were low: 0.05% for makers, 0.1% for takers.

- It supported staking for over 50 coins.

- Its mobile app was smooth, with 1.2 million downloads before being pulled from app stores.

- It had detailed documentation, API access, and educational content.

But none of that mattered when the money was gone. No amount of good UX can fix bad ethics.

How FTX Changed the Crypto Industry

FTX didn’t just die. It forced change.

Before FTX, most exchanges didn’t prove they had customer funds. After FTX? Now they have to.

- Coinbase now publishes monthly proof-of-reserves.

- Kraken and Binance do too.

- The European Union’s MiCA regulations now require exchanges to segregate customer funds.

- The U.S. is pushing the Digital Commodities Consumer Protection Act - which would make fund segregation mandatory.

FTX taught us: if you can’t prove you’re solvent, you’re not trustworthy. It also showed that centralized exchanges are still vulnerable - even the ones with fancy tech and celebrity sponsors.

Should You Use FTX Now?

No. FTX doesn’t exist anymore. The website is offline. The app is gone. The servers are being auctioned off.

The FTX brand is dead. The only thing left is the legal mess - and the billions of dollars that will never come back.

If you’re looking for a crypto exchange today, ask these questions:

• Do they publish regular proof-of-reserves?
• Is customer money kept separate from corporate funds?
• Do they have third-party audits?
• Have they ever been involved in a scandal?

If the answer to any of those is "no," walk away.

What FTX Taught Us About Crypto

Crypto isn’t about the tech. It’s about trust.

FTX had the best technology. The best branding. The best marketing. But it had zero transparency. And in crypto - where you’re not dealing with banks or governments - trust is the only thing that holds everything together.

The collapse didn’t just hurt users. It hurt the whole industry. Legitimate exchanges lost trust. New investors got scared. Regulators came down hard.

FTX didn’t fail because it was too ambitious. It failed because it was dishonest.

And that’s the real lesson: in crypto, you can’t fake integrity.