Introduction to FTX Exchange
Let me walk you through what FTX Exchange was all about. It stood as a top centralized cryptocurrency exchange, focusing on spot markets, derivatives, options, volatility products, and leveraged trading. Founded in 2018 by Sam Bankman-Fried, an MIT graduate and ex-trader from Jane Street Capital's international ETFs desk, FTX operated two main arms: the international platform based in the Bahamas and FTX US for American residents only.
By early November 2022, everything fell apart for FTX, FTX US, and related companies as the exchange plummeted from its high status.
Key Takeaways
Here's the core of it: FTX filed for U.S. bankruptcy protection as a centralized crypto exchange. Its founder and ex-CEO, Sam Bankman-Fried, faced charges and a conviction for stealing customer funds and defrauding investors. The platform handled trading in popular cryptocurrencies, NFTs, and various markets like spot, derivatives, and leveraged ones. While FTX stock wasn't publicly traded, they issued the FTT token, which traded like a crypto asset.
Can You Buy FTX Stock?
You couldn't buy FTX equity on public markets, but if you were a retail investor, you could essentially bet on the exchange via the FTT token they issued. This token worked for paying fees, as margin collateral, and traded on crypto markets much like a stock. Now, according to CoinMarketCap, FTT has no utility left and might get liquidated to pay creditors.
FTX Operations and Management
FTX was incorporated in Antigua and Barbuda, with headquarters in the Bahamas after shifting from Hong Kong in 2021. Their FTX Digital Markets Ltd. was regulated by the Bahamas Securities Commission and didn't serve U.S. users. For Americans, FTX US was the go-to, registered as a money services business with FinCEN. In 2021, FTX US acquired LedgerX and rebranded it as FTX US Derivatives, licensed by the CFTC for derivatives clearing and more.
Even with separate capital setups, FTX and FTX US shared management, funding sources, and marketing. Both had Sam Bankman-Fried as CEO and Gary Wang as CTO, plus common investors from rounds backed by firms like Temasek, Paradigm, and SoftBank. They snagged endorsements from Kevin O'Leary and Stephen Curry, who got equity, and bought naming rights for Miami Heat's arena and UC Berkeley's football field.
FTX Security and Compliance
To get started on FTX, you needed two-factor authentication and a strong password for accounts and withdrawals, with locks if you changed them. You could set up subaccounts with custom permissions, like IP restrictions or read-only access for viewing history without trading.
They monitored for anti-money laundering with real-time alerts on big or odd transactions, requiring KYC for full access. For wallets, FTX claimed multi-layer security and a $200 million backstop fund for hacks or outages.
FTX Products and Trading Pairs
FTX provided a wide array of products for all trader levels, with apps for desktop and mobile. You could use various order types on spot markets, options, futures, leveraged tokens, and MOVE contracts. They had hundreds of pairs like BTC/USDT or ETH/USDT, including their FTT token.
In futures, you could go long or short with up to 20x leverage on over 100 pairs, using stablecoins as collateral. Leveraged tokens gave 3x exposure without margins, like a 3x long Bitcoin token that triples gains. Options let you hedge with calls and puts, while MOVE bets on volatility regardless of direction. Spot markets covered major coins like BTC, ETH, and XRP.
FTX US focused on spot pairs with USD and an NFT marketplace. Internationally, FTX handled nine fiat currencies for deposits and withdrawals, with some restrictions on others.
FTX Fees, Limits, and Payment Methods
Fees on FTX were competitive: 0.04% to 0.07% for takers in futures and spot, plus 0.10% creation/redemption and 0.03% daily for leveraged tokens. Most crypto deposits and withdrawals were free, with specifics like free Bitcoin pulls over 0.01 BTC or one small one daily. Fiat withdrawals over $5,000 were free, with one free under that per week.
On FTX US, taker fees ran 0.05% to 0.2%, with deposits via wire, ACH, cards, or Silvergate. NFT fees differed: $1 to list on US, 2% seller fee; 5% each side internationally. Verified users had deposit limits up to $50,000 per 10 days, no withdrawal caps; less verified faced tighter limits. Remember, both platforms are now inactive, so don't send funds there.
FTX Bankruptcy, Lawsuits, and Convictions
FTX filed for Chapter 11 bankruptcy on November 11, 2022, with Bankman-Fried resigning. He was extradited and charged with fraud and money laundering, along with others. DOJ indictments and SEC/CFTC suits claimed they stole customer funds for luxuries, charities, and ventures, hiding losses.
Bankman-Fried got convicted in November 2023, sentenced to 25 years and $11 billion forfeiture in 2024. New CEO John J. Ray III called it a total control failure and embezzlement. A class-action suit targeted FTX and celebs like Curry and Brady for misleading investors.
FTX Spillover and Revival
The collapse hit the crypto world hard, draining liquidity and sparking runs on other exchanges. Firms like Crypto.com cut staff, while Genesis, BlockFi, Celsius, and Voyager went insolvent after bad loans to FTX and Alameda. Regulators sued them for unregistered securities and misleading statements.
As for recovery, the May 2024 plan offers up to 118% back to most customers, but restarting FTX seems unlikely with nothing left post-repayment. There’s talk of reboots, but it's speculative.
The Bottom Line
In the end, FTX enabled global trading in crypto spots, derivatives, leveraged products, and NFTs until bankruptcy and executive convictions shut it down. If you were involved, keep an eye on the reimbursement process, but don't expect a full revival.
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