Follow the Money: The FTX Collapse and Sam Bankman-Fried's Hidden Empire

On November eighth, 2022, the call came. Changpeng Zhao, the CEO of rival exchange Binance, was pulling out. His company would not be acquiring FTX. For Sam Bankman-Fried, this wasn't just a failed deal. It was the end of the last possible escape route. The company was hollow. And now, everyone was about to find out. Last week, we examined the systemic pressure inside Wells Fargo that led to millions of fake accounts. This week, the fraud wasn't spread across a vast workforce. It was concentrated in a handful of people who held all the keys to a multi-billion dollar kingdom. The world knew Sam Bankman-Fried, or SBF, as the wunderkind of cryptocurrency.

His net worth was estimated at twenty-six billion dollars. His company, FTX, was seen as a benchmark for the industry. But SBF had another company. A private trading firm called Alameda Research. And the wall between those two companies was an illusion. Customer deposits made to FTX were supposed to be safe. They were NOT. They were being secretly funneled to Alameda to cover its trading losses. Only a few people knew the truth. Caroline Ellison, the CEO of Alameda. FTX co-founder Gary Wang. Head of engineering Nishad Singh. According to prosecutors, one of Bankman-Fried's close aides tweaked FTX's accounting software.

This change created a backdoor. It allowed Alameda to borrow billions of dollars from FTX customers without collateral, without triggering internal alarms. Bankman-Fried himself later admitted in an email that Alameda’s leverage was far higher than he believed, due to a… “confusing internal account.” This is general information and our own opinion, not financial advice. But that "confusing account" was where at least a billion dollars in customer money simply vanished. The deception was a closed loop. FTX paid Alameda four hundred million dollars in so-called "software royalties." Alameda then used that money to buy FTX’s own crypto token, FTT, artificially propping up its price.

Then, in early November 2022, the scheme began to crack. A news report leaked details of Alameda's balance sheet. It revealed the firm’s assets were dangerously dependent on the value of the FTT token—the very token they were propping up. The market reacted instantly. Changpeng Zhao of Binance announced he was selling his company's entire FTT holdings. The price of FTT collapsed. A bank run began. Panicked customers rushed to withdraw their funds from FTX, but the money wasn't there. It was gone. Desperately, Bankman-Fried tried to raise seven billion dollars in emergency funds. He called Sequoia Capital, Apollo Global Management, TPG.

No one would give him the money. On November eleventh, 2022, FTX filed for bankruptcy. The aftermath was swift. The U.S. Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission all launched investigations. Sam Bankman-Fried was arrested, charged with fraud, conspiracy, and money laundering. He pleaded not guilty. His defense was that it was all a terrible mistake, a failure of risk management. But his closest allies, including Caroline Ellison, testified against him. The jury didn't buy it. On March twenty-eighth, 2024, Bankman-Fried was convicted on ALL seven counts.

The judge sentenced him to twenty-five years in prison. Ellison served about fourteen months. Bankman-Fried has appealed his conviction. He even sought presidential clemency, a request that was publicly denied. And now, an odd postscript. Starting in July of this year, a bankruptcy court began distributing nine hundred million dollars to FTX creditors. The machine is slowly paying people back. But the man who built it, the one who promised to save lives and ensure a brighter future, is just starting to pay his own debt to society, one day at a time.