FTX Pulls A Fast One

@ Sam Bankman-Fried’s crypto exchange can’t pay its users. Where did the money go?

The epic unraveling of cryptocurrency exchange FTX.com has delivered many shocks: The $8 billion in liabilities it couldn’t pay, its huge exposure to its own magic-bean digital tokens, the apparent misuse of customer funds and the mysterious unauthorized withdrawal that drained off a chunk of the money that remained. Even so, it could have been a lot worse: Founder Sam Bankman-Fried had been trying to expand beyond crypto enthusiasts to capture the assets of everyday savers and investors in stocks and funds. The music stopped before he could get there.

Until recently, when even some of his top deputies stopped hearing from him for long stretches of time, Bankman-Fried had been focused on creating what one of his executives called an “everything app.” It would handle a person’s total financial life, from crypto to equities to sending cash to friends. Already, FTX.com was offering traders outside the US crypto tokens that mirrored the performances pecific stocks. Its US arm, FTX US, launched equity trading this year.

In May, Bankman-Fried disclosed holding more than 7% of the shares of the popular brokerage Robinhood Markets Inc., leading to speculation that FTX might acquire it. His exchange plastered its name on an NBA stadium and ran a Super Bowl ad starring Larry David, while Bankman-Fried was spending freely on campaign donations and making friends in Congress. He had funding from some of the biggest names in venture capital and money management. With a vibe that was more online brokerage than Bored Ape—and a name that didn’t even nod to crypto, bits or coins—FTX seemed to be normalizing digital assets.