FTX looked, for a while, like the grown-up face of crypto: stadium naming rights, famous faces in the ads, venture money, and a founder who talked like a philanthropist between trading screens. In November 2022 that story ended in a liquidity scramble, a failed rescue talk with a rival exchange, and a Chapter 11 filing that pulled FTX, Alameda Research and a thicket of affiliates into court.
The trigger that week was simple enough for ordinary users to understand, even if the balance sheets were not. Reporting by CoinDesk raised questions about how much of Alameda’s reported assets sat in FTT — FTX’s own token. Selling pressure followed; withdrawals surged; the “safe” exchange could not meet the queue. Later court findings and the United States Department of Justice’s case against founder Sam Bankman-Fried established what customers had been sold as a platform: prosecutors said customer funds were misused to cover Alameda’s risks and other spending. A jury convicted him on multiple fraud and conspiracy counts; in 2024 he was sentenced to 25 years and ordered to forfeit a vast sum. Appeals continue; the courtroom record already matters more than any podcast spin.
The scam-awareness lesson is not “never use an exchange”. It is that branding is not custody. A token that props up a related trading firm is not the same as cash in a vault. Celebrity endorsement is marketing, not an audit. If you cannot explain, in plain language, how your coins are held and who can lend them out, you are guessing — and guessing with money that is hard to claw back once withdrawals freeze.
After big exchange failures, a second industry often appears: strangers offering “expedited recovery”, special wallets, or regulator shortcuts for a fee. That is a different risk again.
If an exchange freeze or a follow-up recovery pitch touches you, start at Get help. Before you pay anyone who promises to unlock FTX-era losses, read Fake recovery.
This article is for general information only. It is not legal or financial advice. Details change. If you have lost money, contact your bank or card issuer and use the routes on the help pages.