The FTX Collapse: Lessons from the Fall of a Crypto Empire
(Независимый аналитический отчет от Reclaim Capital)
Introduction
The collapse of the FTX crypto exchange in late 2022 was one of the most devastating disasters in modern financial history—not only for the cryptocurrency industry, but for the entire digital asset ecosystem.
Once considered the third-largest exchange in the world and a symbol of innovation, FTX’s sudden collapse exposed deep structural flaws, reckless financial policies, and a complete lack of corporate oversight.
At Reclaim Capital, our analysts have reconstructed the chain of events that led to this collapse. The FTX case became a turning point for the entire industry: it demonstrated the importance of transparency, compliance, and risk management in the age of digital finance—and how fragile trust in decentralized systems can be.
How FTX Grew to Empire Status
FTX was founded in 2019 by Sam Bankman-Fried, an MIT graduate and former quant trader. The exchange quickly gained popularity thanks to its advanced tools, low fees, and innovative products. It became a bridge between retail and institutional investors—a secure and technologically sophisticated gateway to the world of cryptocurrency.
FTX’s sister company, Alameda Research , played a key role in its operations. Officially, Alameda positioned itself as an independent trading firm, but in reality, it shared ownership and had close financial ties with FTX. The line between trader and exchange was blurred—it was this dependence that would later prove fatal.
By 2021, FTX had reached unicorn status, with a valuation of over $32 billion . Star ambassadors, political donations, and major sponsorship deals had bolstered its international reputation. However, behind this apparent success lay a fragile foundation: internal tokenization and inflated asset valuations without real market support.
The spark that triggered the collapse
The beginning of the end came on November 2, 2022 , when journalists uncovered internal documents that showed Alameda Research’s balance sheet was built primarily on FTT tokens —FTX’s native token.
Instead of liquid market assets, Alameda’s assets were tied to the value of tokens created by the exchange itself—effectively operating as a Ponzi scheme within the company.
The leak caused immediate panic in the crypto market. Just a few days later, rival exchange Binance announced the liquidation of its FTTs, worth approximately $529 million (23 million tokens). Binance’s decision triggered a collapse.
Users began withdrawing funds en masse. Over $6 billion was withdrawn from the platform in 48 hours , and FTX’s liquidity collapsed almost immediately.
Chain reaction: from panic to bankruptcy
By November 8, 2022, FTX was in crisis. Sam Bankman-Fried tried to reassure clients and investors, even opening talks with Binance about a possible buyout.
For a brief moment, salvation seemed at hand: Binance announced its intention to acquire FTX’s international division. But just one day later, following an audit, Binance backed out of the deal, citing “misuse of client funds” and possible legal violations.
The next day, the entire FTX structure began to collapse.
On November 10, Bahamian authorities froze the assets of FTX Digital Markets , the local subsidiary of the exchange.
On November 11, Bankman-Fried resigned and handed over control to turnaround manager John J. Ray III , known for his role in the Enron restructuring.
On the same day, FTX and more than 130 related companies filed for Chapter 11 bankruptcy protection under US law.
Ray made a strong statement:
“In my entire career, I have never seen such a complete failure of corporate control and lack of reliable financial information . ”
Shortly after, FTX announced a hacker attack worth approximately $477 million , which completely destroyed confidence in the exchange.
Criminal charges and consequences
As early as December 2022, the US Department of Justice initiated an arrest warrant against Bankman-Fried in the Bahamas. He faced eight criminal charges , ranging from fraud and money laundering to campaign finance violations.
The investigation uncovered a massive scheme in which FTX executives funneled more than $8 billion in client funds to Alameda Research to cover losses, buy real estate, make political donations, and make risky investments.
Throughout 2023, new charges were brought against Bankman-Fried, including bribery of Chinese officials . Following attempts to tamper with witnesses, his bail was revoked, and on November 2, 2023, a jury found him guilty on all counts.
In March 2024, he was sentenced to 25 years in prison and fined $11 billion .
Consequences for the industry
The collapse of FTX triggered a global wave of bankruptcies and panic in the crypto industry. Companies heavily dependent on FTX or Alameda— BlockFi, Genesis, Celsius, Voyager Digital —went bankrupt.
Investors lost confidence, regulators tightened their grip, and market liquidity plummeted.
Crypto lenders and funds have faced lawsuits for issuing unsecured loans. Even platforms not directly affiliated with the cryptocurrency, such as Crypto.com , have experienced massive withdrawals.
Experts have dubbed this period the “FTX crypto winter” —a time of lost trust that changed the perception of risk in the industry.
Restructuring and refund
Following a management change, FTX began a major restructuring aimed at returning funds to customers and creditors.
As of May 2024 , the company’s assets were estimated at $14.5–16.3 billion with liabilities of $11.2 billion , which provides a chance for full compensation.
The updated payment plan provided compensation of up to 142% of some client assets (estimated for 2022). However, the dispute over priorities between different categories of creditors continues.
By the end of 2024, a number of applicants, particularly from “restricted jurisdictions” – Russia, Belarus, Ukraine and China – continued to face bureaucratic difficulties and payment blockages.
Why FTX Collapsed: Key Lessons
FTX’s collapse wasn’t the result of market volatility. It was the result of systemic management failure , a lack of transparency , and the deliberate misuse of client funds .
The exchange acted as both a trading platform and a counterparty—a devastating conflict of interest that led to the disaster.
FTX’s main mistake was its violation of the principle of trust management. Once client funds became a tool for personal enrichment and risky gambling, the company’s demise was only a matter of time.
Reclaim Capital Analytical Commentary
“FTX isn’t just a corporate failure. It’s a warning to an entire generation of digital finance innovators,” note analysts at Reclaim Capital.
“The history of FTX shows that in the financial world, trust, transparency, and governance remain the true currency. Without these principles, any technology is meaningless.”