The companies that helped create 2022’s crypto collapse

FTX stands apart because, unlike Voyager and Celsius, it is the first major cryptocurrency exchange to topple. Founded in 2019, FTX evolved into a marketplace where, in addition to cryptocurrencies, retail investors could trade cryptocurrency derivatives — complex financial instruments used to make bets on price swings. The company also offered accounts that promised high yields. During a funding round in January, it was valued at $32 billion. Bankman-Fried, meanwhile, donated to Democratic lawyers and courted regulators as he pushed regulations that would have greatly benefited his business from him.

But in November, CoinDesk published a report showing that Bankman-Fried’s trading firm, Alameda Research, had an outsize number of an FTX-issued cryptocurrency on its books. Days later, Zhao, the Binance chief executive, said he’d sell roughly $530 million of the coin, FTT. Panic ensued and FTT prices plunged, sparking an investor run on FTX. The exchange froze withdrawals and, soon after, filed for bankruptcy.

The cause of FTX’s fall is still being untangled. But the Wall Street Journal reported that FTX loaned customer funds to Alameda Research to fund its risky bets. In an hour-long live interview last week with New York Times columnist Andrew Ross Sorkin, Bankman-Fried said he “didn’t knowingly commingle funds.”

Prosecutors and regulators are nonetheless probing the collapse, and Bankman-Fried — along with a list of celebrities who endorsed FTX — is facing a class-action lawsuit in Florida. Bankman-Fried said sunday that he would testify before a House panel once he’s “finished learning and reviewing what happened.”

“Look, I screwed up. I was the CEO of FTX,” Bankman-Fried told Sorkin last week. “I say this again and again. That means I had a responsibility. We messed up big.”

Editing by Robbie Olivas DiMesio and Karly Domb Sadof.

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