FTX was a cryptocurrency exchange founded by Sam Bankman-Fried and Gary Wang in May 2019. The platform was established to facilitate the trading of various digital assets, including cryptocurrencies and derivatives. It quickly gained prominence in the crypto industry, partly due to its association with Alameda Research, a crypto hedge fund also founded by Bankman-Fried. The exchange garnered attention for its user-friendly interface, innovative products, and competitive fee structures.
By October 2021, FTX had secured a significant amount of funding, raising $420 million in venture capital, which attributed to a valuation of $25 billion. This achievement catapulted Bankman-Fried onto Forbes’ list of billionaires, estimating his net worth at $22.5 billion, which later increased to $26 billion by year-end.
However, in November 2022, FTX faced a severe crisis. Reports emerged that a significant portion of Alameda Research’s assets consisted of FTT, a token created by FTX for discounted trading fees. This revelation sparked concerns about the capital reserves at Alameda Research and, subsequently, FTX.
The situation worsened when a major sell-off was triggered after Binance CEO, Changpeng Zhao, announced the sale of the company’s holdings in FTT, amounting to $580 million. This sell-off, akin to a bank run, led FTX to halt customer withdrawals due to a lack of funds.
Following this, FTX reached a deal to be acquired by Binance, but the agreement fell through after Binance cited concerns over mishandled customer funds and ongoing investigations. As a result, FTX filed for Chapter 11 bankruptcy protection. Bankman-Fried resigned as CEO and was replaced by John J. Ray III.