Where Crypto Goes After The FTX Debacle

The collapse of Sam Bankman Fried's firm is the financial scandal of the decade. But it might help the Web3 world clean up its act.

- Jeff John Roberts

IN JULY, THE GIANT cryptocurrency derivatives exchange FTX looked like a pillar of stability. The company and its slacker-chic founder, Sam Bankman-Fried, projected calm and confidence during so-called Crypto Winter, even swooping in to rescue weaker rivals.

That facade crumbled in just a few days in November. First, the value of FTX's in-house token cratered; then FTX was in talks to be acquired by a rival; then it declared bankruptcy as the rival walked away. It was a stunning turn of events for a company that had been valued at over $30 billion, one regarded as a best-in-breed firm that could bring crypto into the mainstream of American finance.

The worst was still to come. FTX appears to have engaged in a massive fraud, lying to investors and looting customer funds, all while operating without board oversight or even basic financial controls. The 30-year-old Bankman-Fried had charmed investors, politicians, and the media (including, yes, Fortune: We put him on our August/ September 2022 cover), but he came to be seen as a curly-headed cross between Elizabeth Holmes and Bernie Madoff.

Numerous regulatory and criminal investigations were underway as this story went to press. (Bankman-Fried has said on social media that he "fucked up," but insisted he was naive, not nefarious.) Still, as investors and regulators scramble to determine how a massive fraud occurred right under their noses, it's not too early to take stock of what we've learned.

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