Skip to main content

This is what really happened to FTX: A breakdown of the crypto crash

This is what the fallout from the massive FTX failure could be

This past week was another painful reminder that history repeats itself. In just one week, the FTX crypto exchange, founded by Sam Bankman-Fried and valued at more than $30 billion (per CNN), collapsed to $1 billion in just a few days before Bankman-Fried filed for bankruptcy on Friday, November 11. With investors left bereft, holding empty money bags, the cry had all the makings of bank runs that helped to spur the Great Depression almost 100 years prior. The crypto crash was only missing the newsboys on the corner, calling out, “FTX insolvent! Investors busted!”

Image used with permission by copyright holder

Banks are lending institutions. Therefore, they do not hold all depositors’ money in cash at physical locations. When big money begins to be withdrawn from the bank, this loss of assets threatens the solvency of the business. When a bank is rumored to be floundering, depositors panic, and flood into the bank demanding their money. Unable to pay it back, the bank crashes and its clients are left bereft.

Recommended Videos

In 1933, President Franklin Delano Roosevelt signed the Banking Act of 1933, which (along with other measures) created the Federal Deposit Insurance Corporation, guaranteeing U.S. depositor funds up to $100,000 (today, this number is $250,000). With the incredible downfall of one of the world’s largest and most stable crypto platforms, it looks like the freewheeling crypto market is finally going to be facing federal regulation just as banks almost a century prior.

How did this happen

On November 2, crypto news source Coin Desk sourced a “private financial document” that revealed that over $5 billion of FTX’s sister hedge fund assets, Alameda Research, were unlocked FTT tokens (minted by FTX). The problem with this is that the value of FTX was based upon the solid financial footing of the Alameda hedge fund. Hence, each was propping the other up in what Alan Watts refers to as the classic “double bind” — the snake eating its own tale.

Two days after Coin Desk revealed this contradictory accounting, Changpeng Zhao, CEO of FTX competitor Binance, announced that the platform was selling off $580 million worth of its FTX holdings. Monday, Bankman-Fried posted, “FTX is fine. Assets are fine,” on Twitter. Similar to Elon Musk assuring participants in the burning flames of the social media giant, this reassurance did little to mollify the masses. Similar to a classic bank run, investors demanded their money in such rapid and large droves that FTX could not compensate them (per CNN).

On Tuesday, Zhao, despite Binance’s rivalry with FTX, agreed to bail out the platform. And the following Wednesday, Zhao backed out, announcing that FTX’s fall was beyond its ability to compensate. Thursday, Bankman-Fried and FTX desperately grasped at whatever methods they could to raise enough liquid funds to pay its investors. And on Friday, unable to coax any institution onto the sinking ship, FTX filed for bankruptcy.

The fallout

Facing an $8 billion shortfall that includes individual investors, venture capital firms like Silicon Valley’s Sequoia Capital and Lightspeed Venture Partners, and government institutions like the Ontario Teachers’ Pension Plan, bankruptcy proceedings are likely to play out over months, even years. The sad fact is that most of these people and organizations will never see another dime of the money that they considered a safe investment.

This raises questions about crypto’s opaque nature and will almost certainly bring about great changes and regulation after its greatest crash. Bankman-Fried, whose fortune dropped from $15 billion to under $1 billion in just three days (per CNN), is also very likely to face a litany of charges after the Securities and Exchange Commission conducts its investigation. The very small group of executives charged with overseeing FTX and Alameda will also be under intense scrutiny in the coming weeks. In the process, former customers and investors will likely file suit. How they will recover the magic money that’s disappeared from financial statements (but never truly existed in a physical form) is a question that may never be answered.

Matthew Denis
Matt Denis is an on-the-go remote multimedia reporter, exploring arts, culture, and the existential in the Pacific Northwest…
Ryan Coogler and Michael B. Jordan reunite for Sinners — here’s what to expect
Coogler and Michael B. Jordan will reunite for the fifth time
Coogler and Jordan

Ryan Coogler is one of the first names you hear when critics discuss the directors with the brightest futures in the movie industry. Coogler has a keen sense of what makes both an entertaining and thought-provoking story on the big screen. He was nominated for the Academy Award for Best Picture for his producing efforts on Judas and the Black Messiah, but let's stick with his directorial career only for the sake of this article. His vision always includes Michael B. Jordan as his muse. Fruitvale Station, Creed, Black Panther, and its sequel are the four films the duo have collaborated on so far, and their fifth film is just around the corner.

Sinners will star Jordan as two identical twins with a checkered past as they travel back to their hometown in search of a better life. The unexpected horrors that await Smoke and Stack when they arrive will test their identities and their abilities to survive. There are not a lot of plot details, but the movie seems to be a perfect mix of horror and thriller elements. It should also critique race relations and make social statements about the current world we're living in if we're to go off of what Coogler's previous movies have focused on. This is everything we know about Sinners so far, from any trailers for the movie to the release date of the film in theaters (it's not far away).
What is the business relationship between Ryan Coogler and Michael B. Jordan?
As mentioned in the intro, Ryan Coogler and Michael B. Jordan have a type of relationship that has been shared in the past by duos like Martin Scorsese and Robert DeNiro. Fruitvale Station was the first time they collaborated. It was Coogler's first time directing a film and one of the first times Jordan was the main star after smaller roles in shows like The Wire. They revived the Rocky franchise with the spinoff film Creed at a time when many people didn't think Jordan would be able to serve as an adequate star for the world's most famous boxing franchise. And then came the movie franchise that changed everything for both Coogler and Jordan: Black Panther. Jordan played the antagonist of the film, while Coogler's vision for Marvel's biggest movie yet helped solidify it as a modern classic. It became the first Marvel film to win an Academy Award.

Read more
What channel is the Super Bowl on?
Wondering how to watch Super Bowl? There are quite a few ways, it turns out
The Super Bowl trophy being held up

It's Super Bowl season, people. The stage is set, with the Kansas City Chiefs taking on the Philadelphia Eagles at Caesars Superdome in New Orleans on Sunday, February 9, 2025. The world will be watching to see if the Chiefs or the Eagles hoist the Vince Lombardi Trophy at the end of the game (well, some will be more concerned with how many times Travis Kelce superfan Taylor Swift will be shown, but we digress). You may have the big screen and all the requisite Super Bowl appetizers, but what channel is the Super Bowl on?

Although it's the biggest sporting event in America, I know from personal experience how frustrating it can be to try to find the game itself. It changes channels every year, and is likely to be that way forever!

Read more
What is Dexter: Resurrection? What we know about the new spinoff
If you're a Dexter fan, here's what to get excited about
Michael C. Hall in Dexter

Dexter is having quite the revival on Showtime and streaming on Paramount+ as of late. The prequel series, Dexter: Original Sin, debuted in December 2024 to widespread fanfare. Now, Dexter fans can rejoice at even more morbid, murderous adventures with Michael C. Hall in Dexter: Resurrection. The award-nominated TV star will reprise his titular role once again in the fourth confirmed series in the franchise. Hall was a surprise guest at Comic Con 2024, where it was announced that he would be donning Dexter's khakis and flannel yet again all these years later. Hall has appeared in other great stuff outside the Dexter world, such as one of Netflix's Harlan Coben series.

We know Dexter: Resurrection is a sequel series, so it will take place after the events of Dexter and Dexter: New Blood. It's not a reboot or redo of the original show, so everything will fit into Dexter's timeline in a way that allows audiences to see even more of Dexter's life.

Read more