FTX was a leading centralized cryptocurrency exchange specializing in spot markets, derivatives, options, volatility products, and leveraged trading. Founded in 2018 by MIT graduate Sam Bankman-Fried, the platform quickly rose to prominence before collapsing in 2022 amid fraud allegations.
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Key Takeaways
- FTX was a global cryptocurrency exchange that filed for bankruptcy in 2022.
- Founder Sam Bankman-Fried was convicted of fraud, conspiracy, and money laundering.
- The exchange offered trading for cryptocurrencies, NFTs, derivatives, and leveraged tokens.
FTX Operations and Management
FTX operated two main platforms:
- FTX (International): Based in The Bahamas, serving non-U.S. customers.
- FTX US: A regulated affiliate for U.S. residents.
Both platforms shared management, investors, and branding despite having separate capital structures. Notable investors included SoftBank, Tiger Global, and Temasek.
Notable Partnerships
- Sports Sponsorships: FTX Arena (Miami Heat), FTX Field (UC Berkeley).
- Celebrity Endorsements: NBA stars Stephen Curry and Shaquille O’Neal held equity stakes.
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FTX Security and Compliance
FTX implemented several security measures:
- Two-Factor Authentication (2FA): Required for withdrawals.
- IP Whitelisting: Users could restrict transactions to specific IP addresses.
- KYC Verification: Mandatory for full trading access.
Despite these measures, FTX’s misuse of customer funds led to its downfall.
FTX Products and Trading Pairs
Key Offerings
| Product | Description |
|---|---|
| Spot Trading | 100+ pairs (BTC, ETH, XRP, etc.). |
| Futures | Up to 20x leverage on perpetual and quarterly contracts. |
| Options | Calls/puts for hedging or speculation. |
| Leveraged Tokens | ERC-20 tokens with 3x leveraged exposure. |
FTX also supported fiat deposits in USD, EUR, GBP, and other currencies.
FTX Fees and Limits
- Trading Fees: 0.04%–0.07% for takers.
- Withdrawal Fees: Free for large withdrawals (e.g., >0.01 BTC).
- Fiat Limits: $50,000 max per 10-day period for verified users.
FTX Collapse and Legal Fallout
Bankruptcy and Charges
- November 2022: FTX filed for Chapter 11 bankruptcy.
- March 2024: Bankman-Fried sentenced to 25 years and ordered to pay $11 billion.
Regulatory Actions
- SEC/CFTC Lawsuits: Accused FTX of fraud and selling unregistered securities.
- Customer Losses: Over $8 billion owed to 1 million creditors.
FTX’s Impact on Crypto
The collapse triggered:
– Market Liquidity Crises: Withdrawals surged at exchanges like Crypto.com.
– Broker Insolvencies: Genesis, BlockFi, and Celsius filed for bankruptcy.
– Regulatory Scrutiny: Increased oversight of crypto lending and exchanges.
FAQs
Why Was FTX Banned in the U.S.?
The FDIC cited misleading claims about deposit insurance, violating U.S. financial laws.
Will FTX Customers Get Their Money Back?
Bankruptcy proceedings aim to recover funds, but full reimbursement is unlikely.
Could FTX Relaunch?
The bankrupt estate may sell the FTX brand, but a revival remains uncertain.
The Bottom Line
FTX’s rapid rise and fall underscored risks in centralized crypto exchanges. Its legacy serves as a cautionary tale for investors and regulators alike.