Lessons from the FTX collapse: what went wrong and what changed
By SendPay Business · · 2 min read
In November 2022 FTX, then one of the world's largest crypto exchanges, collapsed within days and filed for bankruptcy. Customer money had been mixed with its sister trading firm, Alameda Research, and a rush of withdrawals revealed a hole it couldn't fill.
What happened
- Reports raised doubts about Alameda's finances and its reliance on FTX's own token.
- Customers rushed to withdraw, and FTX paused withdrawals.
- FTX filed for bankruptcy in the US on 11 November 2022.
- Founder Sam Bankman-Fried was convicted of fraud in November 2023 and sentenced to 25 years in March 2024.
The core lesson: keep customer money separate
The biggest failure was that customer assets were not kept apart from the company's own money. Separating customer funds, and proving it, is now one of the first things customers and regulators ask crypto firms about.
Checks worth making
Look for where customer assets are held and by whom, whether the firm publishes proof of reserves that includes liabilities, which regulator oversees it, and whether it runs its own trading desk alongside the exchange.
Where SendPay fits
SendPay platforms let customers buy, sell and hold crypto, held with regulated partners, alongside GBP, EUR and USD accounts, powered by licensed partners. SendPay doesn't offer trading tools, DeFi or lending.
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Build my platform →Questions people ask
Does an exchange hold what it owes?
Work out its reserve ratio coin by coin.
Proof of reserves calculator →What is proof of reserves?
A way for crypto firms to show they hold the assets they owe customers.
Proof of reserves →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.