Sam Bankman-Fried (commonly known as SBF) is the founder of FTX and Alameda Research. His criminal conviction for fraud in 2023 followed the largest corporate collapse in cryptocurrency history.
Alameda Research and FTX
Bankman-Fried founded Alameda Research, a quantitative crypto trading firm, in 2017. He then founded FTX, a cryptocurrency derivatives exchange, in 2019 with Gary Wang. FTX grew rapidly to become the third-largest crypto exchange globally, attracting institutional investors and celebrity endorsements. The company raised over $1.8 billion in venture funding at a peak valuation of $32 billion, with investors including Sequoia Capital, SoftBank, and the Ontario Teachers’ Pension Plan.
Collapse
In November 2022, a CoinDesk report revealed that Alameda Research’s balance sheet was heavily dependent on FTT, FTX’s native token. When Binance CEO Changpeng Zhao announced he would sell Binance’s FTT holdings, it triggered a bank run on FTX. The exchange halted withdrawals within days, revealing an approximately $8 billion shortfall in customer funds. FTX filed for bankruptcy on November 11, 2022.
The collapse wiped out billions in customer deposits and triggered a cascading credit crisis across the crypto industry, contributing to the failures of BlockFi, Genesis, and other firms.
Criminal Trial and Conviction
Bankman-Fried was arrested in the Bahamas in December 2022 and extradited to the United States. In November 2023, a federal jury found him guilty on all seven counts, including wire fraud, securities fraud, and money laundering. Evidence showed that customer funds deposited at FTX had been secretly transferred to Alameda Research to cover trading losses, fund venture investments, political donations, and real estate purchases.
In March 2024, Bankman-Fried was sentenced to 25 years in federal prison.
Impact
The FTX collapse was a defining moment for cryptocurrency regulation. It accelerated regulatory actions worldwide, led to increased scrutiny of exchange solvency (popularizing proof-of-reserves audits), and became the most cited example of the risks of centralized, unregulated crypto platforms.