FTX stands apart because, unlike Voyager and Celsius, it is the first major cryptocurrency exchange to topple. Founded in 2019, FTX evolved into a marketplace where, in addition to cryptocurrencies, retail investors could trade cryptocurrency derivatives – complex financial instruments used to make bets on price fluctuations. The company also offered accounts that promised high returns. During a funding round in January, it was valued at $32 billion. Bankman-Fried, meanwhile, donated to Democratic lawmakers and courted regulators while pushing regulations that would have greatly benefited his business.
But in November, CoinDesk published a report showing that Bankman-Fried’s trading firm, Alameda Research, had a large number of an FTX-issued cryptocurrency on its books. Days later, Binance CEO Zhao said he would sell about $530 million of the coin, FTT. Panic set in and FTT prices fell, causing an investor run on FTX. The exchange froze withdrawals and filed for bankruptcy shortly after.
The cause of FTX’s fall is still being unravelled. But the Wall Street Journal reported that FTX lent client funds to Alameda Research to finance its risky bets. In an hour-long live interview last week with New York Times columnist Andrew Ross Sorkin, Bankman-Fried said he “did not consciously pool funds.”
Prosecutors and regulators are nonetheless investigating the collapse, and Bankman-Fried — along with a list of celebrities who endorsed FTX — are facing a class-action lawsuit in Florida. Bankman Fried said on sunday that he would testify before a House panel once he “finished learning and reviewing what happened.”
“Look, I messed up. I was the CEO of FTX,” Bankman-Fried told Sorkin last week. “I say it again and again. It means I had a responsibility. We made a big mess.”
Editing by Robbie Olivas DiMesio and Karly Domb Sadof.