TechTarget – FTX scam explained

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Tangentially relevant to AI safety as the FTX collapse is often cited in discussions about EA community credibility, AI funding ethics, and the risks of inadequate oversight in emerging tech sectors.

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Importance: 18/100news articleeducational

Summary

A comprehensive overview of the FTX cryptocurrency exchange fraud, detailing how the platform rose from its 2019 founding to a $32 billion valuation before collapsing in November 2022 when customer funds were found misappropriated to Alameda Research. The article covers the timeline, causes, and aftermath of one of the largest financial fraud cases in crypto history.

Key Points

•FTX, founded by Sam Bankman-Fried in 2019, reached a $32 billion valuation by January 2022 through aggressive marketing and high-profile acquisitions.
•The collapse in November 2022 revealed that customer funds had been diverted to Alameda Research, a related cryptocurrency trading firm.
•What initially appeared to be an accounting oversight was ultimately major fraud, resulting in billions of dollars lost by customers and investors.
•FTX used celebrity endorsements, Super Bowl ads, and arena naming rights to attract retail investors promising higher yields than traditional banks.
•The case is a prominent example of governance failures, lack of oversight, and ethical misconduct in the largely unregulated crypto industry.

Cited by 3 pages

Page	Type	Quality
FTX Collapse and EA's Public Credibility	--	50.0
FTX Red Flags: Pre-Collapse Warning Signs That Were Overlooked	--	53.0
FTX	Organization	74.0

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By

- [Amanda Hetler,](https://www.techtarget.com/contributor/Amanda-Hetler) Senior Editor

Published: 02 Jan 2025

The popularity of cryptocurrency exchange platform FTX rose rapidly after it was launched in 2019. However, FTX came crashing down in November 2022.

[Cryptocurrency](https://www.techtarget.com/whatis/definition/cryptocurrency) has become popular for investments and sending payments to other people and merchants. Cryptocurrencies differ from [other digital currencies](https://www.techtarget.com/whatis/feature/Compare-NFTs-vs-cryptocurrency-vs-digital-currency) because they are encrypted and use [blockchain](https://www.techtarget.com/searchcio/definition/blockchain) technology to track transactions.

Cryptocurrency coins quickly increased in value, such as the Shiba Inu coin's [45 million percent increase](https://www.fool.com/investing/2022/06/14/shiba-inu-turned-3-to-1-million-2021-do-it-again/) in 2021.

One way to get cryptocurrency is to open an account on a digital trading platform, which lets people buy one coin and trade for another. Through the trading platform, people can also convert cryptocurrency into cash or fiat currency.

Until late 2022, FTX was one of these trading platforms. Sam Bankman-Fried started FTX in 2019. Customers began opening accounts on FTX to trade and buy cryptocurrency, and top venture capital investors started pouring in. By January 2022, the company was worth $32 billion.

However, that came to an end in November 2022. What first appeared to be an accounting oversight turned out to be major fraud, and billions of dollars were lost by customers and investors. It was discovered that customer funds went to accounts controlled by Alameda Research -- a cryptocurrency trading firm headquartered in Hong Kong -- instead of FTX. After this revelation, FTX began to unravel.

![Timeline image showing the important dates of the FTX collapse.](https://www.techtarget.com/rms/onlineimages/2022_ftx_collapse_timeline-f_mobile.png)The timeline of the FTX collapse.


## What is FTX?

FTX was one of the largest digital currency exchange platforms for buying and selling cryptocurrencies. As more people invested in cryptocurrencies, they turned to these platforms because they provided a digital wallet to store cryptocurrencies directly in a personal ac

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