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Lesson 5 of 25 · 9 min read

FTX collapse: how 8 billion dollars vanished

FTX collapsed in November 2022 with about $8B of customer money missing. How SBF, Alameda and the FTT token caused it, his 25-year sentence and the 2026 payouts.

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In this lesson

  • find out how FTX, one of the biggest crypto exchanges, collapsed in nine days in November 2022
  • understand how customer money ended up at Alameda Research and why the FTT token was the weak point
  • learn what happened to Sam Bankman-Fried and why customers who were "repaid in full" still lost out

What happened to FTX? In November 2022 FTX, then one of the world's largest crypto exchanges, collapsed in nine days. A news article revealed that its sister trading firm Alameda Research was built largely on FTX's own token FTT, customers rushed to withdraw, and the money was not there: about 8 billion dollars of customer deposits had been secretly used by Alameda. FTX filed for bankruptcy on 11 November 2022. Its founder Sam Bankman-Fried (SBF) was convicted of fraud in November 2023 and sentenced to 25 years in prison.

SBF was crypto's golden boy: messy hair, shorts, a beanbag next to his desk, a stadium with his company's name and commercials with famous athletes. He talked about giving his fortune away to save the world. In the end he did give away a fortune – it just was not his own.

FTTFTTFTTFTTFTTFTTFTTBREAKING NEWSTotally stable!
FTX and Alameda leaned on a token FTX made itself – one news article was enough to bring the house down.

FTX, Alameda and FTT – who is who#

  • FTX – a crypto exchange founded in 2019 by Sam Bankman-Fried. Millions of customers deposited money and coins there.
  • Alameda Research – a trading firm SBF founded in 2017 and owned. From 2021 it was run by Caroline Ellison.
  • FTT – a token issued by FTX itself. It gave discounts on fees, and its value depended on people's belief in FTX.

The problem: an exchange should keep customer deposits safe and separate. Its sister company was a risky trading house. And both leaned on a token that FTX could print itself.

Timeline#

DateWhat happened
2 November 2022CoinDesk publishes Alameda's balance sheet: a large part of its 14.6 billion dollars in assets is FTT
6 November 2022Binance's CEO says Binance will sell all its FTT; customers start withdrawing from FTX en masse
6–8 November 2022about 6 billion dollars leave FTX in 72 hours; FTX stops withdrawals
8–9 November 2022Binance announces it will buy FTX, then walks away after a look at the books
11 November 2022FTX, Alameda and over 100 related companies file for bankruptcy; SBF resigns
12 December 2022SBF is arrested in the Bahamas and later extradited to the USA
December 2022Caroline Ellison and FTX co-founder Gary Wang plead guilty and cooperate with prosecutors
2 November 2023a New York jury convicts SBF on all seven counts
28 March 2024SBF is sentenced to 25 years in prison and an 11-billion-dollar forfeiture
February 2025the bankruptcy estate starts paying customers
June 2026the appeals court upholds the conviction and the sentence

How the bank run happened#

The FTT token is the key to the collapse. Watch its price in the days after the CoinDesk article:

FTT before and during the collapse. Once people stopped believing in FTX, its own token lost over 90% within a week.
  • Binance sells FTT: Nov 6, 2022
  • Bankruptcy: Nov 11, 2022
  • 9 days: Nov 2 – 11, 2022
FTT/USDT · 1D · Data: Binance Vision · CC BY-NC-SA 4.0

What followed was a classic bank run:

  1. The article showed that Alameda's value rested largely on FTT – a token FTX created out of nothing.
  2. Binance announced it would sell its FTT. The price started to fall, and with it Alameda's "assets".
  3. Customers feared that FTX was in trouble and rushed to withdraw – about 6 billion dollars in 72 hours.
  4. A healthy exchange would simply pay out, because it holds every customer's coins. FTX could not. The money had been lent to Alameda, which had spent it on trading, venture investments, real estate, political donations and loans to its executives.
  5. FTX stopped withdrawals on 8 November. Three days later it was bankrupt.

The new CEO who took over the bankruptcy, John J. Ray III, had previously cleaned up after the Enron scandal. He said he had never seen "such a complete failure of corporate controls". Coming from the Enron guy, that is quite a compliment.

How did the fraud work?#

According to the evidence at trial, Alameda had special privileges on FTX. It could hold a negative balance – in effect borrow from the exchange without limit – and customer deposits sent by bank transfer often went straight to accounts controlled by Alameda. Ellison testified that SBF directed her to use customer money and to prepare misleading balance sheets for lenders. SBF denied intending to defraud anyone, but the jury did not believe him.

The proof of reserves trend that many exchanges started after November 2022 is a direct reaction to FTX: customers wanted to see that the coins really exist.

What happened to SBF and the others?#

  • Sam Bankman-Fried – convicted on 2 November 2023 of seven counts of fraud and conspiracy, sentenced in March 2024 to 25 years. In June 2026 the US Court of Appeals for the Second Circuit unanimously upheld the conviction. As of October 2026 he has asked the US Supreme Court to hear his case and has formally applied for a presidential pardon; President Trump reportedly said in January 2026 he had no intention of pardoning him, and neither request had succeeded at the time of writing.
  • Caroline Ellison – former Alameda CEO, pleaded guilty and testified against SBF. She was sentenced to two years and released in January 2026.
  • Gary Wang and Nishad Singh – FTX executives who pleaded guilty and cooperated; neither was sent to prison.

Did the customers get their money back?#

Surprisingly, mostly yes – on paper. The bankruptcy estate recovered billions, partly because investments FTX had made (for example in an AI start-up and in Solana tokens) rose in value. Payouts began in February 2025, and by the end of July 2026 the estate had distributed roughly 10 billion dollars. Many groups of customers have by now received the full value of their claims, some of them with interest on top.

But here is the catch: claims were valued in dollars at the prices of 11 November 2022, the day of the bankruptcy. Bitcoin cost about 16,900 dollars that day. If you had 1 BTC on FTX, you were owed about 16,900 dollars (plus some interest), not one bitcoin – while bitcoin later traded at several times that price. "Repaid in full" meant repaid in 2022 dollars, at the bottom of a bear market.

Warning signs you could have seen#

  • The exchange's own token as collateral. When a company's value rests on a token it can print itself, it is built on air.
  • One owner of the exchange and the trading firm. An exchange that trades against its customers through a sister company has a conflict of interest at its core.
  • No proof of reserves, no real board. FTX had no independent board and no reliable accounting.
  • Celebrity marketing. Stadium names and famous faces say how much money a company spends on ads, not how safely it keeps yours.
  • High yields on deposits. FTX paid interest on balances – money that had to come from somewhere risky.

Even the biggest exchange can fail within days

FTX was valued at 32 billion dollars and had top investors – and it went from normal to bankrupt in nine days. Any exchange can freeze withdrawals in a crisis. Keep there only what you actively trade, and hold your savings in a wallet where you control the keys.

How to start with your own wallet is explained in the course on safe custody, in the lesson exchange or your own wallet.

Common myths#

  • "FTX was hacked." There was a theft of several hundred million dollars right after the bankruptcy, but the 8-billion-dollar hole came from inside – customer money used by Alameda.
  • "Customers got everything back, so nobody lost." They got dollars at November 2022 prices. Measured in bitcoin, most of them lost a lot.
  • "SBF just made bad trades." A jury found that he knowingly took customer money and lied about it.

Summary

  • FTX collapsed in November 2022 after a bank run triggered by an article about Alameda's FTT-heavy balance sheet.
  • About 8 billion dollars of customer money had been secretly used by Alameda Research.
  • SBF was convicted in 2023 and sentenced to 25 years; the appeal failed in June 2026.
  • Customers were repaid at November 2022 prices, so many lost out on the later rise of bitcoin.

Sources#