FTX Exchange Review

FTX Exchange Review: The Rise and Collapse of a Crypto Giant

⚠️ Important Notice: FTX collapsed in November 2022. The exchange is no longer operational. This review is kept for historical reference and educational purposes. Do not attempt to use FTX.

Background

FTX was founded in 2019 by Sam Bankman-Fried (SBF) and Gary Wang. It grew rapidly to become the third-largest crypto exchange globally, known for innovative derivatives products and the prominent public profile of its founder. SBF became the face of crypto in mainstream media and lobbied extensively for crypto regulation.

The Collapse

In November 2022, CoinDesk published a report revealing that Alameda Research (FTX's affiliated trading firm) held a large portion of its assets in FTT (FTX's own token). Binance CEO CZ announced he would sell all Binance's FTT holdings, triggering a bank run.

Within days, FTX froze withdrawals. An investigation revealed that FTX had been using customer deposits to fund Alameda Research's trading positions — a fundamental breach of trust and likely illegal use of customer funds.

FTX filed for bankruptcy in November 2022. Sam Bankman-Fried was arrested, extradited to the US, convicted on 7 counts of fraud and conspiracy in November 2023, and sentenced to 25 years in prison in March 2024.

Lessons Learned

The FTX collapse was the defining event of the 2022 crypto downturn and highlighted critical risks:

1. Proof of reserves matters: Always use exchanges that publish verifiable proof-of-reserves
2. Don't keep large amounts on exchanges: Hardware wallets are the only safe long-term storage
3. Yield is not free: High yields from exchange programmes often come with hidden counterparty risk
4. Regulatory compliance is a signal: Regulated exchanges (Kraken, Coinbase, Gemini) have oversight that reduces the risk of fraud

FTX Recovery

FTX's bankruptcy estate, led by John Ray III, recovered significant assets. In May 2024, the bankruptcy court approved a plan to repay creditors 118 cents on the dollar (in USD, not crypto) — meaning creditors would be fully compensated based on November 2022 prices.

Conclusion

FTX serves as the most important cautionary tale in cryptocurrency exchange history. Always use a self-custody hardware wallet for significant holdings, and choose regulated, transparent exchanges.