How Did FTX Collapse? The $8 Billion Hole That Sank It in Nine Days

Status as of 11 October 2026: the conviction and sentence are affirmed on appeal; a Supreme Court petition and a pardon application are pending. Facts below rest on court records, sworn testimony or two independent outlets. "Our read" marks analysis.

The short version

On 7 November 2022 the founder of the crypto exchange FTX told followers that "FTX is fine. Assets are fine." Four days later FTX filed for bankruptcy. A federal judge later found that its customers had lost about $8 billion. Ten months earlier it was valued at $32 billion. From a leaked balance sheet on 2 November to the filing on 11 November: nine days.

Earning to give

Sam Bankman-Fried studied at MIT and was drawn to effective altruism, in particular "earning to give": earn as much as you can, then give most of it away. After Jane Street, a trading firm, he started the crypto trading firm Alameda Research in 2017. FTX, an exchange where customers deposited money to trade, launched in May 2019. One founder, two firms: one that traded, one that held other people's money. In 2022 he signed the Giving Pledge.

Our read: here people divide. Admirers saw a sincere moral project. Critics, some inside the movement, asked how far the means can bend.

Thirty-two billion

In January 2022 FTX raised $400 million at a $32 billion valuation, up from $25 billion in October 2021. Investors included Temasek and SoftBank's Vision Fund 2. FTX put its name on the Miami Heat's arena and bought a Super Bowl ad.

What outsiders could not see was how the two firms were wired together. At trial, co-founder Gary Wang testified that Alameda had special privileges, including an account that could go negative and a $65 billion line of credit. The defence answered that Alameda was a market maker and that these features came with the job; on cross-examination Wang agreed the credit line was there so Alameda's trading would not be interrupted.

Nine days in November

2 November: CoinDesk publishes a leaked Alameda balance sheet. It shows $14.6 billion in assets, with about $5.8 billion in FTT, a token created by FTX.
6 November: Binance's Changpeng Zhao says Binance will sell its FTT; Alameda's Caroline Ellison offers publicly to buy it at $22.
6 to 8 November: customers rush out: roughly $6 billion in net withdrawals in 72 hours, against tens of millions on an average day, according to a message to staff. On 7 November, the "FTX is fine" post.
8 and 9 November: Binance signs a non-binding letter of intent, then walks away, citing due diligence and reports of mishandled customer funds.
11 November: FTX, Alameda and about 130 related companies file for Chapter 11. Bankman-Fried resigns. FTT has fallen from about $22 to around $2.

The new chief executive, John J. Ray III, who had overseen the Enron wind-down, wrote in a sworn declaration: "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here."

Twelve jurors

Bankman-Fried was arrested in the Bahamas in December 2022 and released on a $250 million bond. Ellison, Wang and Nishad Singh pleaded guilty and cooperated. His bail was revoked in August 2023 after the judge found he had likely tried to influence witnesses.

At trial Ellison testified: "He directed me to commit these crimes." Asked on the stand whether he had defrauded anyone, Bankman-Fried answered, "No, I did not." His lawyer, Mark Cohen, told the jury in closing that "poor risk management is not a crime." The prosecution said he took customers' money, knew it was wrong and believed he could make it back.

On 2 November 2023, after under five hours, the jury found him guilty on all seven counts. In March 2024 Judge Lewis Kaplan sentenced him to 25 years and ordered $11 billion in forfeiture. The judge found customers lost about $8 billion, investors $1.7 billion and Alameda's lenders $1.3 billion. Ellison received two years; Wang and Singh, time served.

The money came back

The bankruptcy team sold investments, including a stake in the AI company Anthropic for about $884 million (disclosure: ReelMind uses Anthropic's Claude in production). In October 2024 a judge approved a plan to pay most customers about 119 percent of their claims; by March 2026 about $10 billion had been paid.

Our read: the dollars tell only part of it. Claims were valued at November 2022 prices, with one Bitcoin counted at about $16,871. By December 2024 a Bitcoin had topped $100,000.

Were customers made whole?

Bankman-Fried: FTX was never insolvent, only short of cash in a panic, and the bankruptcy destroyed value.
Many customers: claims were fixed at 2022 dollar values, so they missed the later price rise.
The courts: Judge Kaplan said a thief who bets stolen money and wins "is not entitled to a discount on the sentence…". In June 2026 the Second Circuit unanimously upheld the conviction, called the evidence "robust" and held that whether his assets later rose in value is irrelevant to whether he committed fraud.

What this means

Our read: supporters of crypto said the lesson was to hold your own coins; critics said crypto needs the rules banks have. Both can point to FTX. The older lesson: customers could see the arena, the ad and the valuation, but not where their money sat.

Sources

Court records and primary documents:

News reporting:

Books behind the story

If you want more than 11 minutes: Going Infinite by Michael Lewis and Number Go Up by Zeke Faux both cover Bankman-Fried and FTX. We have no affiliate arrangement yet, so these are plain mentions with no links and we earn nothing from them. Affiliate links will be added and labelled here once a programme is approved.

Narration is an AI voice. Visuals are AI-generated archival-style illustrations and our own charts; no real person's likeness is shown. ReelMind is not affiliated with any person or company named here.