FTX: From $32 Billion to Bankruptcy in 10 Days

A $32 billion exchange collapsed in 72 hours. Its founder got 25 years. Creditors are getting 119% back. Make it make sense.

FTX, once valued at $32 billion

FTX was the golden child of crypto. Sam Bankman-Fried built it into a $32 billion empire with celebrity endorsements, a Super Bowl ad featuring Larry David, a stadium naming deal with the Miami Heat, and political donations that made him the second-largest donor to the Democratic Party. He slept on a beanbag in the office and wore cargo shorts to Senate hearings. Washington loved him.

On November 2, 2022, CoinDesk published a report showing that Alameda Research, SBF's trading firm, held most of its assets in FTT, FTX's own token. The collateral backing a $32 billion empire was a token that the same empire created. On November 6, Binance CEO CZ tweeted he would sell his remaining $580 million in FTT. That tweet triggered a bank run.

Within 72 hours, FTX went from $32 billion valuation to bankruptcy. Over 9 million users lost access to their funds. The total customer deficit was over $8 billion. SBF had been using customer deposits to fund Alameda's trades, political donations, Bahamas real estate, and investments in ventures like Anthropic. A secret backdoor in FTX's code allowed Alameda to borrow $14 billion in customer funds without proper accounting.

SBF was arrested in the Bahamas in December 2022. His trial in October 2023 was a parade of betrayal - his ex-girlfriend Caroline Ellison (Alameda CEO), his co-founder Gary Wang, and his head of engineering Nishad Singh all flipped and testified against him. The jury convicted him on all seven counts in under five hours.

In March 2024, Judge Lewis Kaplan sentenced SBF to 25 years in federal prison. SBF showed no emotion. He has since appealed. Ellison received 2 years. Wang and Singh received lighter sentences for their cooperation.

Then the bizarre twist. The FTX estate, run by restructuring expert John Jay Ray III (the same man who unwound Enron), recovered between $16 and $18 billion. Through December 31, 2025, the estate distributed $8.131 billion to creditors across multiple rounds. Small claimants (under $50,000) received approximately 119% of their November 2022 account values, plus 9% annual interest. US customers reached 95% cumulative recovery.

The irony: many creditors got back more dollar value than they deposited, because claims were calculated at the collapsed November 2022 prices while crypto prices had rallied significantly by the time payouts began. Getting ripped off by SBF accidentally became a profitable trade for small depositors. Larger creditors got less - 78% to 85% depending on claim type.

FTX's collapse triggered a domino effect that killed BlockFi, Genesis, and dozens of other firms. It was the Lehman Brothers moment for crypto - the single event that proved the industry had replicated every toxic practice it claimed to be replacing.