On November 11, 2022, FTX’s then-CEO Sam Bankman-Fried resigned, handing the reins of the company to John Ray, who immediately filed for Chapter 11 bankruptcy protection in the United States. This day marked the beginning of the end for what was once one of the most prominent and influential cryptocurrency exchanges in the world.
The US authorities accused Bankman-Fried and four of his accomplices of fraud. FTX users and creditors saw billions of dollars worth of funds locked out of their reach on an exchange they were not sure they would ever be able to repay. Ray reported that the company represented “a dismal failure of corporate controls at every level of the organization,” and later compared its operations to a “dumpster fire.”
In addition to the impact FTX has on millions of users and its employees, it appears that many lawmakers and business leaders often use the exchange as a talking point when discussing cryptocurrencies, as it represents one of the most egregious examples of illicit practices. The company declared bankruptcy amid a downturn in the cryptocurrency market that alienated much of the public opinion from the industry as token prices collapsed and many companies filed for Chapter 11.
Exactly two years after that fateful day at FTX, the price of Bitcoin (BTC) has risen to an all-time high of over $87,000. The United States is still reeling from the results of the election in which many candidates were supported by crypto-political action committees that sought to oust lawmakers working against their interests, spending nearly $134 million.
Jail time and repayment to clients
There were also consequences for Bankman-Fried and his crew. The former FTX CEO was convicted of seven felony counts and sentenced to 25 years in prison, though his legal team has filed an appeal.
Of the other former FTX and Alameda Research executives who pleaded guilty to charges, only one — engineering director Nishad Singh — was sentenced to time served for his role in misusing client funds. Others, including Caroline Ellison and Ryan Salama, are expected to spend years behind bars. Gary Wang, one of the exchange’s founders, is scheduled to be sentenced on November 20.
Related to: Real estate firm FTX files $1.8 billion lawsuit against Binance, CZ
In bankruptcy court, a federal judge approved a reorganization plan in October that could allow FTX’s debtors to repay 98% of users (roughly 119% of their claimed account value). The scheme will compensate the exchange’s clients for the value of their digital assets at the time of bankruptcy and does not take into account gains in the price of BTC and other tokens.
FTX ownership is still pursuing money that Bankman-Fried and others allegedly misappropriated in political contributions, locked up in accounts through other exchanges, and through investment deals with companies like SkyBridge Capital. Sam Trabuco, the former Alameda co-founder, was forced to turn over $70 million and property and a yacht to the estate as part of a settlement with debtors.
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