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FTX, founded by Sam Bankman-Fried in 2019, quickly rose to prominence as one of the world's largest cryptocurrency exchanges. With innovative features and aggressive marketing, FTX attracted millions of users and significant investments, reaching a valuation of US$32 billion at its peak.
Alameda Research, a crypto trading firm also founded by Bankman-Fried, played a crucial role in FTX's operations. Alameda's trading strategies and market-making activities were integral to FTX's success.
As FTX grew, so did regulatory scrutiny. In 2022, various regulatory bodies began investigating FTX's operations, focusing on its compliance with financial regulations and its handling of customer funds. These investigations raised concerns about the transparency and legality of FTX's business practices.
In November 2023, FTX faced a severe liquidity crisis. Reports emerged that FTX was unable to fulfill withdrawal requests from its users, leading to a massive loss of confidence. The crisis was exacerbated by revelations that FTX had been using customer funds to cover losses at Alameda Research.
On November 11, 2023, FTX filed for bankruptcy, citing a US$8 billion shortfall in customer funds. The bankruptcy filing sent shockwaves through the cryptocurrency community and led to a sharp decline in the value of many cryptocurrencies.
Bankman-Fried was arrested in December 2023 on charges of fraud and money laundering. Prosecutors alleged that he had orchestrated a massive fraud scheme, siphoning billions of dollars from FTX customers to finance his lifestyle, political donations, and risky bets by Alameda Research.
In March 2024, Sam Bankman-Fried was found guilty of seven counts of fraud and conspiracy. He was sentenced to 25 years in prison and ordered to pay US$11 billion in restitution.
