Between 1 June 2022 and 22 July 2022, Alameda's known wallets were the largest stablecoin depositors and sources of liquidity to all of FTX's known wallet addresses, accounting for 10% of Tether transfers and 30% of USD Coin transfers on the exchange. Alameda was once the largest trader on FTX, bringing liquidity to the exchange. The close relationship and potential conflicts of interest between Alameda and FTX drew scrutiny from the rest of the cryptocurrency industry. As of August 2021, Bankman-Fried still owned 90% of Alameda. Ellison was reported to have a romantic involvement with Bankman-Fried. Bankman-Fried was the CEO of both companies until he formally stepped down from his position at Alameda in October 2021, promoting traders Caroline Ellison and Sam Trabucco to co-CEOs. In 2019, Bankman-Fried had the idea of starting a cryptocurrency exchange to help bring in revenue to fund Alameda's activities, and founded FTX. Sam Bankman-Fried co-founded Alameda Research, a cryptocurrency trading firm, in 2017. Anonymous sources cited by Reuters said that between $1 billion and $2 billion in consumer funds could not be accounted for.

įTX and its handling of customer funds is under investigation by the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ) in the United States and a criminal investigation by the Royal Bahamas Police Force and the Securities Commission in the Bahamas. The same sources stated that Bankman-Fried, Alameda Research CEO Caroline Ellison, and other FTX executives were aware of the decision. Īnonymous sources cited by the Wall Street Journal 10 November 2022 stated that FTX had lent $10 billion from customers' accounts to fund Alameda Research earlier in 2022, a move forbidden by FTX's terms of service. The collapse of FTX has resulted in a ripple effect across the cryptocurrency industry, with the price of Bitcoin falling to its lowest level in two years. Some $473 million in funds were later taken from FTX in an 'unauthorized transaction'. Bankman-Fried's net worth, estimated at $16 billion prior to the collapse, was reported as having been wiped out, and several institutional investors of FTX wrote off their investment stakes in the company. The collapse of FTX has had a wide impact on cryptocurrency markets, with comparisons made to the Enron scandal and Madoff investment scandal, and was described by federal prosecutors as 'one of the biggest financial frauds in American history.' Following the bankruptcy, the Securities Commission of the Bahamas froze the assets of one of FTX's subsidiaries.

Bankman-Fried resigned as FTX CEO and was replaced by John J. On 11 November, FTX, Alameda Research, and over 100 affiliated entities declared bankruptcy. On 8 November, Binance signed an offer to acquire FTX, but then withdrew the offer. The move also triggered a spike in withdrawals from FTX, causing the exchange to freeze withdrawals and creating a liquidity crisis. Following the allegations, Binance-a competing cryptocurrency exchange and a prior investor in FTX-announced it would sell its FTT, leading the market price of the token to crash. On 2 November 2022, CoinDesk published an article stating that Alameda Research, a trading firm affiliated with FTX and owned by FTX chief executive Sam Bankman-Fried, held a significant amount of FTX's exchange token, FTT. Prior to its collapse, FTX was the third-largest cryptocurrency exchange by volume and had over one million users. The collapse of FTX, caused by a liquidity crisis of the company's token, FTT, served as the impetus for its bankruptcy. The liquidation of Bahamas-based cryptocurrency exchange FTX began in November 2022.

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