The swift and messy demise of Sam Bankman-Fried's FTX crypto empire

If there's something distinctive about the world of crypto, it's how fast big companies and big fortunes can be spun out of nothing — and just as swiftly collapse. Nowhere has that been more apparent than the meteoric rise and fall of crypto exchange FTX and its CEO and founder, Sam Bankman-Fried.

Bankman-Fried founded his crypto hedge fund Alameda Research in November 2017, with FTX established in May 2019. By early 2022, it had scaled to a multibillion-dollar operation, vaulting Bankman-Fried to the front ranks of both crypto executives and political donors.

But when a leaked company balance sheet exposed a shaky financial foundation, rival exchange Binance announced it would sell its hoard of FTT, the token associated with the FTX crypto exchange. That sparked the crypto equivalent of a bank run, as customers hastily moved to withdraw their funds. 

FTX couldn't cover the outflows, and the $32-billion crypto empire vaporized overnight, along with Bankman-Fried's purported $12 billion personal fortune and his reputation as a crypto genius. The collapse triggered a range of civil and criminal investigations, and Bankman-Fried has been charged by the Department of Justice with 13 felonies. 

The broad strokes of the FTX debacle may be known, but right now, there are still some blank spots on the canvas. Some bizarre, troubling and occasionally hilarious details have emerged in court filings, but important questions haven't been answered. 

Billions of dollars of cash and crypto assets remain unaccounted for. In an early bankruptcy filing, newly installed CEO John J. Ray III — the corporate cleanup artist brought in to manage this mess — wrote that there wasn't even a confirmed list of FTX employees.

As a corporate calamity, FTX is almost without precedent — a sprawling global network of more than 100 companies, some of them with little apparent purpose except perhaps to shuffle money around, all of it run by a motley group of supposed financial savants from a luxury penthouse in the Bahamas. 

It quickly scaled to a multibillion-dollar operation, vaulting Bankman-Fried to the front ranks of both crypto executives and political donors, and making FTX a household name endorsed by numerous celebrities. By the second week of November 2022, just a few years after it was founded, the FTX crypto empire had turned to ashes.

The investigation is proceeding just as quickly as FTX's collapse. Several FTX executives — Bankman-Fried's friends and corporate lieutenants — have pleaded guilty to serious charges involving fraud, money laundering, campaign finance violations, and other charges. 

They have implicated Bankman-Fried in a range of financial crimes that could send him to prison for the rest of his life. Still, it's all firmly in "allegedly" territory: Bankman-Fried has pleaded not guilty to all charges, including a recently introduced charge that he authorized bribes of $40 million in crypto to be paid to Chinese officials to unlock $1 billion in funds frozen on a Chinese crypto exchange. 

His trial is scheduled to begin in October, and even as Bankman-Fried's legal fate remains uncertain, his company has become an unexpectedly fascinating crime scene. 

In some ways, it's an object lesson in how not to run an alleged criminal enterprise, at least if you don't want to get caught. 

FTX's rapid success — the huge amount of money it accumulated via venture capital, customer deposits and other sources — potentially contributed to some reckless spending. One of the great tasks of FTX's new leadership has been to account for where all the money and crypto went. It hasn't been easy.

Perhaps $12 billion of FTX customer funds were allegedly diverted to Alameda. According to government filings, this hoard of cash was used to cover Alameda's trading losses, buy real estate (including in the names of Bankman-Fried's parents), make investments in other crypto startups, and provide billions of dollars of "personal loans" to Bankman-Fried and top executives.