The FTX Collapse Explained: What Really Happened?

Before everything went south, Bankman-Fried was apparently salty about the whole Binance deal fallout. As per internal communication seen by The New York Times, the FTX chief told his circle that Binance probably “never really planned to go through with the deal.” Caroline Ellison, a friend of Bankman-Fried who was running Alameda, also told employees that she was sorry for the current state of affairs.

She reportedly admitted that “Alameda had taken out loans and used the money to make venture capital investments, among other expenditures.” The admission was not really secret, as previous reports had more or less established that customer funds were misappropriated and used to fund other FTX group ventures.

Like clockwork, and staring at a shortfall worth $8 billion with no deep-pocket savior like Binance, FTX filed for bankruptcy. Bankman-Fried resigned from his position, but this likely won’t be the end of the story. Investigations into FTX and Alameda research suggest that the former is over $3 billion in debt only to its top 50 creditors, and anywhere between one or a couple billion dollars worth of assets has just vanished without a trace.

In Bankman-Fried’s absence, John J. Ray III has taken over as the new CEO to assist with the bankruptcy proceedings. However, multiple news outlets report that pieces of evidence that could trigger criminal investigation against key FTX figures have already been identified and submitted. Interestingly, possibilities of system manipulation, and even a hack, are also being investigated.