FTX Fiasco: Unraveling the Cryptocurrency Controversy

The FTX fiasco, which unfolded three years ago in the cryptocurrency world, captivated attention and sparked controversy. It all began with SBF, who presented himself as a champion for people’s empowerment and better opportunities through crypto. However, revelations soon emerged, shedding light on a complex web of allegations and financial missteps.

FTX, despite its relatively recent emergence, quickly rose to become one of the industry’s major players. Interestingly, Binance, the leading exchange with years of experience in the crypto sphere, made a significant early investment in FTX, unknowingly setting the stage for future competition between the two giants.

The impact

FTX’s impact extended beyond trading platforms when it secured naming rights for the Miami Heat stadium, now known as the FTX Arena. The brand’s reputation was further bolstered by endorsements from high-profile celebrities such as Tom Brady, Gisele Bundchen, Stephen Curry, and Larry David (source: We Got This Covered).

Before founding FTX, SBF had already established Alameda, a trading firm. Alameda, led by Caroline, who is rumored to be SBF’s girlfriend, made reckless high-leveraged bets without adequate risk management measures. Caroline’s public admission of using amphetamines to gain a supposed advantage over “normal non-medicated humans” raised further concerns about the firm’s decision-making.


When Alameda incurred significant losses, it turned to FTX to borrow money for continued trading. Essentially, Alameda was utilizing funds entrusted to FTX by its users for their own individual gain. Despite compelling evidence presented by members of the crypto community, highlighting the scam through on-chain metrics and other data, regulatory bodies and financial journalists failed to take action or provide assistance.

Surprisingly, neither the government nor the FBI had any knowledge of FTX’s illicit activities, involving the lending of users’ funds to Alameda. It was the vigilant crypto community, armed with their understanding of on-chain metrics, who uncovered the truth and exposed the scam.

Binance comes into play

As the controversy unfolded, Binance distanced itself from FTX, publicly stating its disagreement with the exchange’s practices without disclosing specific details. Subsequently, Binance announced the complete divestment of its stake in FTX, further intensifying scrutiny surrounding the embattled exchange.

The situation reached a tipping point when FTX suspended withdrawals, a clear indication of the company’s financial troubles. Users, alarmed by this development, launched investigations into the whereabouts of their funds. They soon discovered that FTX had lent substantial amounts to Alameda, which had squandered the money through unsuccessful trades. This revelation triggered a classic “bank run” scenario, as panicked users hurriedly attempted to withdraw their funds, only to find that FTX lacked the necessary liquidity due to their ill-fated dealings with Alameda.

The lingering question remains: how did FTX manage to operate for such a prolonged period without facing consequences? It appears that FTX received preferential treatment from the government, allowing them to bypass regulatory scrutiny, likely due to their substantial donations to the Democratic Party. SBF’s public associations with influential regulators, including figures like Maxine Waters and Gary Gensler, who later became the SEC chairman, only added to the perception of favoritism and regulatory leniency.

In conclusion, the FTX fiasco serves as a cautionary tale for the cryptocurrency industry, emphasizing the need for heightened vigilance, robust regulatory oversight, and the crucial role of independent journalism in protecting users’ interests and fostering trust within the crypto ecosystem. This incident prompted stakeholders to reassess partnerships, investment strategies, and regulatory frameworks, all with the aim of safeguarding the integrity and stability of the cryptocurrency market.

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