FTX, formerly the world’s fourth largest cryptocurrency exchange platform, went from 32 billion USD to filing for Chapter 11 bankruptcy on November 11 over a matter of just a few days. This has led to countless uproars, with many losing their entire life savings they had invested into cryptocurrencies stored with FTX. Since the turn of unfortunate events, FTX users have found it near impossible to withdraw money from the exchange platform, attributed to the fact that FTX no longer has a pool of liquid cash to carry out their payouts. This has had many asking how a multibillion dollar company underwent such a catastrophic mismanagement of its assets seemingly overnight.

Sam Bankman-Fried is the founder and, now former, CEO of FTX. His first claim to fame came when he bought underpriced Bitcoin in the US and flew to countries like South Korea and Japan to sell his crypto, where the market prices were marked up. Along with FTX, Bankman-Fried also founded Alameda Research, essentially a crypto-based hedge fund company. The trouble started on November 2, when CoinDesk, a cryptocurrency information platform, reported on Alameda Research’s worrisome financial balance sheet that stated that nearly half of its assets, worth billions of dollars, lay in FTT, a token created by and held in majority by FTX. Normally, this may not be too serious of an issue; however, the problem lay in that Alameda had placed its FTT assets as a collateral for loans from FTX customer deposits. In short, this meant that Alameda was putting up a token they had created themselves through FTX for real money that they could then use in their business.

Upon hearing this statement, Changpeng Zhao, CEO of the largest cryptocurrency trading platform Binance, announced on Twitter that he would be selling Binance’s large share of FTT tokens. Due to the scale of the publicity in this announcement, rumors began to spread about FTX’s ability to liquidate its funds for payouts leading to FTT’s rapid decline in value. These drops in price eventually culminated in FTX entirely halting its withdrawals on November 8. A non-binding deal between Bankman-Fried and Zhao which initially intended to bail out FTX also fell through, and bankruptcy was declared just a few days later. Amongst all the chaos, several FTX wallets were emptied amidst an apparent hacking attempt which also tried to access related bank accounts. Bankman-Fried also resigned from his position as CEO on November 11, relinquishing his title to John J. Ray III, famous for his ability to steer companies through bankruptcy proceedings. Ray later stated that he had never seen such “complete failure” of corporate control in his entire life.

The FTX controversy has had far-reaching consequences for both the platform’s users and other investors to the crypto market. With upwards of a million users directly affected by the failure of FTX, countless others have also been affected by the alleged hacker, who is reported to have moved 186 million USD into crypto cold storage — an offline storage method that protects currency from hack attacks — and another 477 million USD to Ethereum and DAI. The hacker’s attempts to dump his store of Ethereum for Bitcoin has led to the drop in price of Ethereum, further affecting those who had invested in the currency.

It is no secret that the cryptocurrency market has always been a risky investment, with unforeseeable fluctuations in prices possibly causing losses of one’s entire savings. But with the current situation showing the public that even previously reputable exchange platforms like FTX aren’t free from risk, people are further being driven away from the concept of cryptocurrency. It is unclear whether crypto can ever make a full recovery from this ordeal, but with the court proceedings yet to reveal the full extent of Bankman-Fried and FTX’s abject failures to determine whether this was truly a one-off event, cryptocurrency has never been in such a precarious situation. The only obvious solution is for companies to start becoming more transparent about their internal affairs to once again gain the trust of their customers.