In November 2022, FTX, the world’s third-largest cryptocurrency exchange founded by Sam Bankman-Fried, a US-based company, went bankrupt, suspending withdrawals of all customer assets in what became a financial fraud case. Suspicions of fraudulent accounting practices were raised, and the event surpassed the 2022 LUNA crash, becoming one of the largest financial frauds in the cryptocurrency market, plunging the entire market into stagnation.

On November 2, 2022, cryptocurrency media outlet CoinDesk published an article raising suspicions about the liquidity of Alameda Research, which held FTX’s assets. It revealed that more than one-third of the $146 billion in assets were held in FTT tokens or Solana, resulting in near-zero liquidity for the assets.

Amidst the liquidity concerns raised by CoinDesk, on November 7, 2022, at 6:49 AM, Changpeng Zhao, the founder of Binance, posted about liquidating all FTT and BUSD acquired with initial investment, learning from the Luna incident, triggering a massive sell-off. Consequently, FTT plummeted by over 80% within a day.

Initially, some perceived the event as a war between Binance and FTX, igniting the crash. However, Zhao clarified through a tweet at 4 AM the next day that their position adjustments were merely for transparency, distancing Binance from causing the crash. Despite this, trust in FTX remained shattered.

Amid a liquidity crisis, Changpeng Zhao signed a non-binding LOI around 1 AM on November 9, 2022, excluding FTX US, signaling potential international business acquisitions to protect users. However, on November 10, Binance withdrew its acquisition intent due to significant debts and poor customer fund management, increasing the likelihood of bankruptcy.

Despite FTX halting withdrawals to prevent bankruptcy, massive funds were withdrawn once withdrawals resumed. Sam Bankman-Fried, the founder and CEO, struggled to inject liquidity but found it practically impossible as the cryptocurrency market’s funding needs fluctuated rapidly, reaching an estimated $90 billion by the day of bankruptcy, up from $60 billion when Binance was approached for help.

Despite efforts, including suggestions of funding from Huobi and Tron’s founder Justin Sun, and a proposed 1:1 token exchange for Tron’s ecosystem tokens, FTX filed for Chapter 11 bankruptcy. Sam Bankman-Fried stepped down as CEO, and John J. Ray III, known for successfully managing Enron’s bankruptcy and repaying $20 billion, is expected to take over as the new CEO.

According to Bloomberg, Sam Bankman-Fried’s fortune, which was valued at $16 billion just a week before, dwindled to zero.

Alameda Research, after turning its website inaccessible to the public, saw all employees resign after a final meeting on November 11, 2022.

With a total debt of $662 billion, FTX, FTX-US, and Alameda Research all filed for Chapter 11 bankruptcy protection, marking the largest bankruptcy in the history of the cryptocurrency industry. The Wall Street Journal diagnosed the swift downfall of FTX, once considered a reliable platform, as a significant event.

Furthermore, reports emerged of $870 billion worth of virtual assets suddenly disappearing from FTX-owned hot wallets, prompting investigations into hacking possibilities and unauthorized transactions after the bankruptcy filing. US authorities deemed the entire incident as fraudulent from the outset.

In conclusion, the bankruptcy of FTX, one of the world’s leading cryptocurrency exchanges, marks a significant event in the history of the cryptocurrency industry. The cascade of events leading to FTX’s downfall, from liquidity concerns to failed acquisition attempts and massive asset withdrawals, highlights the inherent risks and vulnerabilities present in the volatile world of digital assets.