What Happened to FTX? The Collapse of the 2nd Biggest Crypto Exchange

Your go-to resource for everything around the collapse of FTX, from Alameda to Sam Bankman-Fried.

You've no doubt been hearing a lot about the crypto exchange FTX and its recent collapse and may be asking yourself, "What happened to FTX"?

So why did Sam Bankman-Fried's FTX fail and what does this say about the future of cryptocurrencies?

This article will be your go-to resource for everything FTX, including education around the topic so anyone, with or without crypto experience, can understand exactly what's going on.

You can listen to the whole article by clicking play below:

An introduction to the FTX cryptocurrency exchange

What is a Crypto exchange?

Crypto exchanges are digital marketplaces where users can buy and sell cryptocurrencies, such as Bitcoin and Ethereum. The most popular crypto exchanges include Coinbase, Binance, and Kraken.

They provide users with trading platforms that allow them to place orders, make payments and track their investments. These exchanges are typically regulated by government agencies and as such should comply with anti-money laundering (AML) and know-your-customer (KYC) regulations.

The most common type of transaction on a crypto exchange is a spot transfer. This is when you buy or sell an amount of a cryptocurrency at the present market price. Cryptocurrency exchanges often also support margin trading and futures contracts, which involve leveraged trades based on pre-determined prices.

A quick history of FTX cryptocurrency exchange

Founded in 2019, FTX rapidly advanced to global acclaim due to a series of large-scale acquisitions, competitive marketing techniques and low trading fees.

By 2020, FTX was one of the fastest-growing exchanges, with a monthly trading volume surpassing $20 billion at times.

Major venture capital groups bought in, investing almost $2 billion in the company.

Who founded FTX?

Sam Bankman-Fried, the 30-year-old founder of FTX, became a notable public figure in not only his company but cryptocurrency as a whole. With heavy celebrity endorsements and partnerships with major sports teams, it was impossible for anyone involved in the crypto industry to miss him or FTX.

Sam Bankman-Fried built his fleeting financial empire by leveraging what he dubs "crypto derivatives" - financial instruments based on assets like Bitcoin or Ethereum that provided traders with more options for hedging their positions in what is still an emerging market.

sam bankman fried under trial ftx
Sam Bankman-Fried, the 30-year-old founder of FTX, became a notable public figure in not only his company but cryptocurrency as a whole

What is Alameda Research's link to FTX?

Alameda Research was a crypto asset trading firm founded by Sam Bankman-Fried prior to FTX back in 2017. It provided liquidity services to FTX, and also helped to develop new products for the platform.

In the initial stages, FTX didn’t have the ability to accept wire transfers, so customers would send money to Alameda, and FTX would credit their accounts.

Alameda quickly became one of the most influential players in the cryptocurrency space, with its market cap reaching over $2 billion as recently as February 2021.

How was FTX structured and what was its business model?

FTX was a corporate mess of over 100 companies, all owned by Bankman-Fried and his co-founders Gary Wang and Nishad Singh.

FTX is divided into four distinct categories: a venture capital division that invests in other businesses, a hedge fund that trades cryptocurrency for profit, and two exchanges - one meant for US audiences which Follows set US regulations and one international exchange with much more lenient rules.

The revenue for this company came from many sources but was primarily driven by the exchange. Most people obtain cryptocurrency by exchanging fiat currency with an institution like FTX. This establishment functions somewhat like a bureau de change in that it offers currency pairs at a floating exchange rate. FTX would earn a commission off of each transaction.

FTX also made a good portion of its money where traders would attempt to profit from swings in prices of crypto assets. The more complex the trade, the higher percentage cut FTX got.

What is FTT?

FTX's digital token, FTT, is comparable to well-known cryptocurrencies such as Bitcoin. Nowadays, plenty of crypto platforms generate their own tokens as an incentive for people to use their services; these tokens often come with benefits and act like stock in the platform.

These digital tokens utilize blockchain technology, where a group of computers work together to create a shared ledger. This tracks different digital assets and is much more secure than one computer trying to do it alone. The first big project that used this was bitcoin.

There is a large variance in how blockchains, cryptocurrencies and tokens operate. Many are no longer mined like Bitcoin, but rather created by a single entity. An example of this would be FTT, which was minted by FTX and given out to users as rewards. Another result of being minted instead of mined is that these types of tokens are often less transparent- making it difficult to track how many have been created. Although people can buy and sell these types of tokens, trading is relatively limited due to the lack of transparency.

What led to FTX's collapse?

Sam Bankman-Fried's recent bankruptcy filing has revealed his large and poorly managed crypto empire, which may have been built on fraudulent activities. It was described as a "complete failure of corporate controls" that eclipses even that of Enron.

Much of what we are currently learning is coming from John J. Ray III, who is has been installed as CEO after the bankruptcy filing. Over the years, John had previously oversaw Enron's liquidation in the 2000s, among other notable bankruptcy cases.

John J. Ray III wrote: "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here."

ftx crypto empire collapse
FTX’s recent bankruptcy filing has revealed a large and poorly managed crypto empire, which may have been built on fraudulent activities.

FTX built its own house of cards

With hindsight to look back on it's no doubt that FTX went bankrupt. We are seeing potential evidence of mismanagement, insider trading, and what could be considered fraud.

One of the key toxic elements was the group's decision to continue purchasing poor "degen" investment opportunities as well as keeping their core stores of funds in their own FTT token.

When things took a turn for the worse, the token value decreased, which then created a cycle of death. The more the token tumbled in value the less reserves the company had to support its operations, which in turn pushed the value of the FTT token lower and lower.

By the end Sam Bankman-Fried and his co-founders Gary Wang and Nishad Singh had no liquidity reserves to fall back on when things got tough. It was only a matter of time before this house of cards came crashing down around them.

Various Investigations into FTX

The Royal Bahamas Police Force stated that they are investigating FTX, causing more problems for the company. Last year, FTX moved their headquarters to the Caribbean country. Even before filing for bankruptcy or the missing funds was an issue, both the U.S Department of Justice and Securities and Exchange Commission started examining FTX's business practices as there were suspicions that they violated some U.S laws. They also wanted to investigate whether Bankman-Fried had broken any anti fraud rules or if he profited in any way from this whole fiasco.

FTX's "false" bailouts

Prior to the end, there were actions taken that on the surface seemed altruistic but as you dive deeper you see that they were desperate attempts at salvaging a sinking ship. Such actions in context highlight to many that the core management team under founder Sam Bankman foresaw the company's collapse.

This is best demonstrated by the bailouts of Three Arrows Capital ($100m), Voyager ($377m), and Blockfi ($400m).

These were all in the form of what appeared to be loans with what many are calling "false" promises of repayment. Plus it seems now that these companies were all forced to put their user assets under the FTX banner.

What's worse, in many occasions after the loan was made, another loan of a similar size was then issued back to FTX or one of its affiliated entities.

Leak of Alameda's balance sheet

This all started to come to light at the start of November when Alameda was investigated by CoinDesk after the publication of a balance sheet revealing potential heavy holdings of the FTT token. 

What was discovered in the balance sheet revealed what many are now calling evidence of mismanagement. The document showed that Alameda had purchased approximately $8 million in FTT tokens and held about $11 million more. Many started to come to the conclusion that Alameda was in fact insolvent.

When investors saw this news they started to question Sam Bankman-Fried's actions. It seemed as if he was making what some would consider a "self-serving" decision by using investor funds to prop up his own token, which ultimately led to its demise.

The CZ Tweet

After Alameda’s balance sheet was leaked, Changpeng “CZ’’ Zhao, CEO of rival crypto exchange Binance, announced on Nov. 6 that his company would sell off all its FTT tokens. The price of FTT dropped sharply.

This started the "run to the bank"  as people started to pull out their funds in what many are now referring to as the "FTX Exodus".

As the price dropped, many FTX customers moved to withdraw their assets from the platform. Though the extent of the connections between Alameda and FTX were not yet public, a series of recent crypto platform collapses had already put the crypto community on edge. 

FTX Withdraws halted

The withdrawals were then suddenly halted by FTX and its affiliated companies. Customers had to wait in what seemed like an endless line to get their funds back.

At this point, the entire crypto community was holding its breath, wondering what would happen next. Little did everyone know what was about to unfold within the following weeks would be some of the most chaotic scenes the crypto world has seen. 

Binance's failed FTX purchase

There was a day of hope when it seemed for a second that Binance, the world's largest cryptocurrency exchange, would bail out Sam and his terminal exchange. 

It was reported that Binance had offered to purchase FTX in what seemed like a “bailout” of the exchange. However, this did not come to pass as it was announced later that same day that negotiations between the two exchanges had fallen through and the deal between them never went ahead.

FTX declared bankrupt

The end result is what we are seeing today. By mid-November the value of FTT fell by 90%, and FTX had lost its ability to pay interest on margin loans.

Despite all efforts, FTX eventually succumbed to what many are now calling mismanagement and lack of liquidity FTX, its sister firm Alameda Research and 130 affiliated companies under the banner of FTX Group filed for bankruptcy on 11th Nov.

The now bankrupt crypto exchange FTX is being sued by investors who allege he mismanaged funds and committed fraud, and both the US government and Bahamas securities regulators are investigating FTX's financial violations including potential insider trading.

The FTX hack

Things did get stranger when a hacker drained $US400 million from customer wallets. Some believe that it's in fact a company insider that had stolen funds, using a mixture of different exchanges to consolidate the crypto tokens into three wallets now being watched closely.

Arkham Intelligence's crypto analysis revealed that around $339 million still exists in wallets affiliated with the individual who attempted to launder the tokens through several exchanges as quickly as possible.

After tracing the person's transactions, Arkham found that it appeared as though they were in a panic and had lost a large sum of their token holdings” to what is called “slippage”. Slippage refers to the money lost when the market price does not meet the intended price when doing a transaction.

Sam Bankman-Fried's crypto exchange FTX experienced outflows of $US 600 million. The company has instructed all users to delete FTX apps and avoid installing any new software upgrades.

A note pinned to the company Telegram channel read: “FTX has been hacked. FTX apps are malware. Delete them. Chat is open. Don’t go on FTX site as it might download Trojans.”

According to Arkham Intelligence, it appears one party involved in the hacking hived off around $US 400 million in a variety of different cryptocurrencies from frozen customer wallets.

Mismanagement of Alameda & FTX's group of companies

I think it's important to deep dive into Alameda because it is by and large one of the key antagonists in the FTX story with much happening under the surface that is potentially fraudulent and illegal.

No procedures, compliance or respect for customers' funds

After reaching a peak value of $32 billion, the trading platform FTX saw about one million customers and processed trades worth nearly a billion dollars per day.

However, this group of companies was controlled by a very small group of people who were inexperienced and untrustworthy, according to what John said in the bankruptcy filing.

The integrity of its systems was compromised and there was 'faulty regulatory oversight abroad'.

According to the filing, supervisors signed payments using 'personalized emojis' on an 'online chat' platform.

John explains  'The Debtors did not have the type of disbursement controls that I believe are appropriate for a business enterprise.

'For example, employees of the FTX Group submitted payment requests through an on-line 'chat' platform where a disparate group of supervisors approved disbursements by responding with personalized emojis.'

He also found that 'One of the most pervasive failures of the FTX.com business in particular is the absence of lasting records of decision-making.'

It seems that Sam Bankman-Fried urged employees to use messaging platforms where messages auto-delete after a certain amount of time.

The most damning claim against FTX is that there was actually a back door built into the system so Alameda Research could access user funds any time they wanted. Over time, they took more risks and eventually created a $10 billion hole in Alameda's books which they then borrowed from FTX.

As you can imagine from procedures such as the above it has come to light that, 'the FTX Group did not keep appropriate books and records, or security controls, with respect to its digital assets'.

John has gone as far to say he does 'not have confidence' in the information and accounts provided to him.

Who is billionaire FTX co-founder Gary Wang and why is he still committing code?

Another strange plot twist surrounds Gary Wang.

The co-founder of the FTX exchange, Gary Wang is a mysterious figure in the cryptocurrency world. He has been described as a "billionaire investor" by some sources, but he is elusive, rarely appearing publicly.

Although FTX has a high profile, with millions spent on sponsorships for the Miami Heat stadium and the Mercedes Formula One team, Wang has almost no public presence, the only photo being one of his back as he codes on a laptop.

As mentioned above, Wang was conspicuously active on GitHub the day before FTX filed for bankruptcy protection, pushing code updates to multiple repositories associated with the exchange.

It's unclear what these changes were intended to do or what effect they had — if any — on the platform's operations prior to its collapse.

At least one user noticed his activity and posted it to Twitter in a now-viral post that sparked speculation he knew something was amiss at his company prior to the bankruptcy filing.

FTX's $10 billion bet with Alameda

Research emerged that showed that Alameda held a large amount of FTT. It was noted that FTT held a certain market value, if the price were to drop, Alameda would be at risk of insolvency. This sparked further research into Alameda.

According to a recent report by The Wall Street Journal, it was discovered that FTX had lent billions of dollars in user funds to its sister company Alameda Research. This money was put towards risky bets with the hopes of gaining more customers or assets. Up to $10 billion were loaned out, which is over half of what FTX had originally received from customers.

In addition to FTX, Alameda had to secure loans from other financial firms as well, for a total of $1.5 billion, according to people familiar with the matter, said UK-based economist Frances Coppola in a report.

Sam Bankman-Fried loaned $1bn from Alameda Research

Alameda Research loaned FTX co-founder Nishad Singh $543 million and Sam Bankman-Fried $1 billion, according to filings.

Given that Bankman-Fried is the CEO of both FTX and Alameda Research, this is alarming. He has been accused by various people of transferring money between the companies without the correct disclosure.

The craziness behind Sam Bankman-Fried

As what often is the case, as soon as you are under the microscope, no stone goes unturned.

Various people have come forward to accuse SBF of using the money for his own investments, gambling and even partying.

There is also tentative evidence of connections with various projects, politicians and regulators, which is why Sam is yet to be charged and potentially why the mainstream media is trying to paint a much rosier picture than the reality.

Was SBF responsible for Luna's collapse?

The founder of FTX, Sam Bankman-Fried, is allegedly responsible for the Terra Luna crash. This event saw its market cap drop from $40bn to just $500m in a very short period of time, resulting in unprecedented losses for investors. The crypto crash left many retail investors bankrupt, and countless more in debt.

Bitboy Crypto, a famous YouTuber in the crypto community, has accused Bankman-Fried, FTX and Alameda Research of being behind all the major crypto crashes this year, most notably that of Luna.

FTX created an opportunity for themselves when they shorted Terra Luna, which then led to the chain of events that caused three flash crashes this year.

FTX and Sam Bankman-Fried were purposely finding crypto projects with large market caps and shorting them to create enough sell pressure for a flash crash that he and his group could benefit from.

Sam Bankman-Fried's regulatory connections

The Wall Street Journal reported that Bankman-Fried and FTX had close connections with regulators. This could be what allowed them to operate without any repercussions despite their activities.

It has been alleged by many people in the cryptocurrency space that Sam Bankman-Fried was using his connections to manipulate certain assets.

He was allegedly able to use his regulatory contacts to push for favourable regulations for the projects he was involved in and get away with crimes that would otherwise be punishable.

Sam Bankman-Fried was the 2nd biggest democratic donor

Bankman-Fried was the second-largest Democratic donor this election cycle by a longshot, according to the most recently available campaign finance data from the Federal Election Commission, second only to philanthropist George Soros.

He donated more than $39.7 million to primarily Democratic causes during the 2022 federal election cycle, including six-figure checks to the Democratic National Committee and the Senate Democrats' main super PAC, as well as $6 million to the super PAC leading Democrats' efforts to hold the House.

The only Democratic donor to give more last cycle was philanthropist George Soros, whose $129 million dwarfed Bankman-Fried's.

Some reports state that he was planning on spending more than $1 billion on a 2024 election.

Such connections have led people to speculate as to why SBF was pushing for crypto regulations. It's surmised that there was a plan to crack down on the more decentralized structure in Crypt (e.g. Bitcoin), thus keeping financial power in the hands of the big banks, corporates and the US government.

It's such connections that may also be the reason why to date at least, SBF has not been charged with any kind of criminal misconduct.

Post-bankruptcy puff pieces

It seems as though SBF has accumulated high profile media links in his short career because mainstream channels are attempting to position the "FTX Contagion" as an entrepreneurial misstep.

The article published by the New York Times seemed to glorify SBF without truly unveiling his fraudulent past, such as Enron and other crimes.

The published article seemed to show favouritism towards SBF and covered up his faults due to possible pressure from the government. Readers felt that the New York Times didn't give any new information about Sam Bankman Fried's recent problems and instead glossed over them with phrases such as "failed to see warning signs" and "became the target of investigations by the SEC and the Justice Department."

All points to manipulation and an attack on true decentralization & Bitcoin

It seems Bankman-Fried was involved in a concerted effort to manipulate the markets and ultimately promote what he wanted rather than what is best for the crypto industry.

His involvement in numerous controversial initiatives, as well as his close connections with regulators, points to a desire to push for centralized control over currency and market movements. His activities have been detrimental to the cause of true decentralization and Bitcoin has suffered because of it.

Ultimately, these events have highlighted the need for increased scrutiny of the activities of key players within the cryptocurrency space and what role they are playing in manipulating the markets and their own interests. It's important that we take action before such cases become too common in our ecosystem.

Drug abuse & lack of empathy

Another issue that has been brought to light recently is Bankman-Fried's drug use. Reports have surfaced that he was a heavy user of cocaine, ecstasy, and marijuana. The fact that he could have been trading users' funds and making huge financial decisions whilst high points to a potential and serious criminal misconduct.

In addition to these issues surrounding Sam Bankman-Fried and FTX, what makes the whole situation worse is the fact that it appears he never showed any real empathy towards those affected by his actions or for what happened to FTX. His interviews seem to be filled with bravado and  what some may say is arrogance.

For example, in an interview with the Wall Street Journal he stated: "I was running a billion dollar company. I thought, “What more could go wrong?”

This shows that Sam Bankman-Fried had no remorse for what happened to FTX and what investors went through as a result of his mismanagement and alleged fraudulent activities.

What are the consequences for FTX Users?

After suffering cryptocurrency's version of a bank run, FTX is now billions of dollars short. According to Saturday estimates from analytics firm Elliptic, 713 million is missing from the exchange. To secure customers' assets, FTX's new CEO John Ray III has temporarily suspended trading and withdrawals.

Mental health is key to moving forward

So many people, big and small, were fooled by Sam Bankman-Fried and worse lost money that was trusted to the FTX exchange.

It's our opinion that first and foremost we must support each other and ensure a high level of mental health in this time of great difficulty for everyone involved in the crypto space.

It's important to take a step back from what happened and focus on what you can do moving forward. In many cases this may well mean exiting from the space. No matter what decisions you make, it's important to not do anything rashly or in a panic. Take your time and do your own research.

We must not forget what has happened, but it’s better to use what we have learned to protect ourselves in the future and make sure this never happens again.  We need to ensure that those affected get justice and that no one else is taken advantage of in such a manner ever again. 

Will FTX Users get their money back?

Although some people will receive part of their money back, it won't be all of it. Even Bankman-Fried believes that it would take $8B to refund everyone completely. However, John Ray III said that there isn't a single document that lists every depositor the company has, and while the balance sheet looks like there is an equal amount of assets and liabilities, “I do not have confidence in it and the information therein may not be correct as of the date stated”.

The FTX customers based in the United States may well face an even steeper uphill battle, as they will need to compete with other creditors for their money back all because there are no guarantees or protections offered by the government to those individuals who choose to do business with unregistered crypto companies like FTX.

How will the FTX collapse affect the cryptocurrency industry as a whole

The collapse of FTX, the largest in the short history of cryptocurrencies, may further deter investors who are already cautious about potential stability and security issues. Customers on the FTX platform may not be able to recover their assets, potentially triggering legal action. The U.S. Securities and Exchange Commission (SEC) and other regulators may see the collapse of FTX as justification for tighter regulatory scrutiny of cryptocurrencies. Congress may be more inclined to step in and create new laws governing digital tokens and exchanges.

The problem is not the technology, it's the people!

The collapse of FTX shows what can happen when a company is run by someone who is more concerned with making money than with running the business responsibly. It's important to remember that what happened here was not related to the cryptocurrency industry as a whole, but rather just one man's poor decision-making.

The crypto community needs to come together now and speak out against people like Sam Bankman-Fried in order to create an environment where investors are protected from fraudsters, and companies have proper oversight and regulation. The technology may be new, but it doesn't mean it can't be regulated properly. With the right structure in place, we could ensure that what happened here never happens again.

The value of Bitcoin

It's arguable that Satoshi understood the need for autonomous and trustless systems to such a degree that this was the driver for his anonymity. He argued that the root cause of the various collapses of financial institutions over the years is the trust that is required between institution and consumer, something that has been betrayed over and over again.

If FTX and Luna highlight anything, it's that no one person or team can carry the responsibility of a trustless system, which is what Bitcoin was intended to be. It's this lack of trust that gives Bitcoin value.

BTC's price has dropped along with the vast majority of other digital currencies. However, being as FTX is yet another example of an individual should not have such corporate power, it's our thought that this will in time only strengthen. Bitcoin's value, and that of other truly decentralized systems.

More decentralization and automated protocols are what will save the day for crypto. The failures of individuals do not have to be indicative of what the technology can deliver, and with Bitcoin's trustless system, it has never been more important for what comes next.

Acceleration of cryptocurrency regulations

The collapse of FTX will likely lead to an acceleration of cryptocurrency regulations. Regulators such as the U.S. Securities and Exchange Commission (SEC) are under increasing pressure to develop a regulatory framework that can protect investors, while also encouraging innovation within the cryptocurrency space.

More robust laws and regulations could ensure that what happened with FTX never happens again, and that any company looking to operate in the crypto space must adhere to high standards of business practices and financial reporting. Such measures could go a long way towards ensuring the safety of investor funds, while keeping bad actors out of the industry.

The eradication of many small altcoins

The FTX collapse is likely to be seen as a cautionary tale for investors, who may now be more cautious when it comes to investing in smaller altcoins. Many of these coins lack the liquidity and established infrastructure that is found in larger cryptocurrencies such as Bitcoin or Ethereum, making them more prone to manipulation and fraud.

This could lead to an overall contraction of the altcoin space, with only those projects that are built on solid foundations surviving the cull.

ftx collapse lesson for investing in smaller altcoins
The FTX collapse is likely to be seen as a cautionary tale for investors, who may now be more cautious when it comes to investing in smaller altcoins.

How will the FTX story end?

The contagion

As prices stabilized this week in the wake of FTX's bankruptcy announcement, a number of companies within the industry have come forward to reveal their own exposure to the bankrupt exchange.

BlockFi denied claims that the majority of its assets were tied up in FTX but told customers that withdrawals will remain paused due to "significant exposure" to the collapsed exchange. This news comes after BlockFi had suspended customer withdrawals last week and is now considering filing for Chapter 11 bankruptcy protection.

In a tweet by Travis Kling, founder of crypto hedge fund Ikigai, it was confessed that most of the company's assets are tied up in FTX. Kling also apologized for investing customer funds in FTX and promoting it.

The Solana Foundation has published a blog post revealing that it has $1 million in cash or equivalent assets stuck in FTX. Furthermore, the foundation holds 3.24 million shares of FTX Trading LTD common stock, 3.43 FTT tokens and 134 SRM tokens from decentralized exchange Serum. Fried co-founded the Solana-based DEX in 2020. It's thus little surprise that Solana was hit worse than most of the other big Crypto projects.

The Foundation's disclosure also helped to explain how much money Bankman-Fried had invested into the network's token. FTX and Alameda had bought 50.5 million SOL together.

In order to comply with the requirements of voluntary Chapter 11 proceedings in the United States, crypto exchange Liquid Global froze all withdrawals, including fiat. This follows FTX Trading Ltd's acquisition of Liquid Group and all its subsidiaries, such as Quoine Corporation in Japan and Quoine Pte. based out of Singapore, earlier this year for an undisclosed amount.

Circle's CEO, Jeremy Allaire, recently confessed in a regulatory filing that the company's investment in FTX amounts to $10.6 million dollars--an amount much lower than he had alluded to just after FTX collapsed. The filing said Circle expects its financial performance this year will be far "materially lower" than what was initially projected last February.

Unfortunately it's likely this is only the start of such revelations. It's likely in the short term to see more companies come forward and potentially more yet go under.

It's important to know this, not to lose faith with the industry, but instead to practice extreme caution over the next few months until we can see the light at the end of the tunnel.

Lessons and takeaways from the collapse of the crypto exchange FTX

Get out of exchanges

"Not your keys, not your coins."

This has long been the mantra of cryptocurrency users, yet some investors have still chosen to store their funds in custodial exchange wallets.

The collapse of FTX should serve as a reminder that centralized exchanges can and do fail. Investors should always be aware of the risk they are taking when holding their coins on such platforms, and should look for alternative methods such as cold storage, which is essentially a way of storing assets offline without allowing remote control, or non-custodial wallets that allow them to keep their own private keys.

Don't trust, verify.

No clear bottom - stay safe and be smart

The FTX collapse should be a reminder to investors that they need to do their own research when investing, and to watch out for signs of fraud. Investors should never blindly trust what exchanges, projects or promoters say. They need to verify all claims with independent sources.

Finally, the collapse of FTX highlights the fact that there is still no clear bottom in cryptocurrency markets yet. Although prices have been holding steady for the last few months, the underlying fundamentals and regulatory environment are still largely uncertain. As such, it is important for investors to remain vigilant and practice risk management strategies when investing.

It's also worth noting that while this event may cause short-term disruption in crypto markets, it will ultimately lead to an improved industry  as long as lessons are learned and safeguards are taken to avoid similar situations in the future. In the meantime, investors would be wise to heed the old investment adage: "know what you own, know what you don't, and never invest what you can't afford to lose."

About the Author

James Killick

Founder of Chainwiz and crypto tech specialist.