FTX was a top global crypto exchange valued at $32B before collapsing in November 2022.
A leaked balance sheet showed Alameda Research was propped up by FTT — a token created by FTX.
Customer deposits had been secretly diverted to Alameda for trading and venture bets.
When confidence broke, customers rushed to withdraw billions FTX didn’t actually have.
The exchange froze withdrawals, filed for bankruptcy, and Sam Bankman-Fried was removed and later convicted.
Billions in customer assets were lost, making it one of the largest scandals in crypto history.

What Drove the Collapse

commingling of customer funds with Alameda’s trading operations
use of self-issued FTT tokens as illusionary collateral with no real liquidity
complete absence of governance — no board, no CFO, no controls, no audited financials
customer run revealing that deposits had already been spent or pledged
small group of insiders controlling everything without transparency or oversight
collapse triggered not by markets, but by structural fraud and balance-sheet deception

The Investor Lessons

custody risk is real — if customer assets aren’t segregated, they aren’t safe
governance and audited financials matter, even (and especially) in new industries
self-issued tokens or circular collateral always create fragile systems
charismatic founders and fast growth can hide deep structural risks
transparency, independent oversight, and real assets are non-negotiable in finance
if you can’t verify where the money is, you don’t understand the business

FTX (2022)