The Vibe: The dramatic 2022 implosion of a top crypto exchange that went from $32B valuation to bankruptcy in days—exposing massive fraud, lost customer funds, and shaking the entire industry.
The Details: FTX, founded by Sam Bankman-Fried (SBF), was a major centralized exchange (CEX) that collapsed in November 2022. Key events: Nov 2—CoinDesk revealed Alameda Research (FTX’s sister firm) held mostly FTT (FTX’s token) on its balance sheet. Nov 6—Binance sold its FTT holdings, sparking panic. Massive withdrawals followed, revealing an ~$8B hole—customer funds were secretly loaned to Alameda for risky trades. Nov 8—withdrawals halted. Nov 11—FTX filed for Chapter 11 bankruptcy; SBF resigned; John Ray III took over, calling it the worst corporate controls failure he’d seen. SBF faced fraud charges, was convicted, and sentenced. Billions in customer funds were missing initially, but recoveries (including asset appreciation) enabled a bankruptcy plan approved in 2024: customers get 118%+ of Nov 2022 values in cash (not crypto), with distributions starting 2025 and ongoing into 2026 ($7.1B+ paid so far). The collapse accelerated Proof of Reserves (PoR), self-custody trends, and stricter regulations.
Pro Tip: Never keep large amounts on exchanges—use non-custodial wallets for long-term holding. Check PoR reports regularly on any CEX you use, diversify platforms, and treat flashy promises (sponsorships, celebrity ties) as red flags. The FTX saga proves even “reputable” platforms can fail spectacularly.