FTX and its sister hedge fund, Alameda Research, filed for bankruptcy on Friday, November 11. Seemingly overnight, the cryptocurrency trading platform, once worth $32 billion, is virtually worthless.

Founded in 2019, FTX emerged onto the cryptocurrency scene and quickly gained prominence.

Marketing itself as the safe, regulated way to buy cryptocurrency, FTX’s platform acted much like a bank, where users could buy and sell cryptocurrency. The platform held investors’ currency for them.

Early on, Sam Bankman-Fried, FTX’s 30-year-old founder, attracted major investors such as BlackRock, Tom Brady, Steph Curry, and Shaquille O’Neil.

Despite FTX’s ability to attract elite investors, Twitter owner and founder of Tesla, Elon Musk, remained skeptical of Bankman-Fried’s rapid success.

“He set off my bs detector,” Musk tweeted. “I did not think he had $3B.”

Nonetheless, FTX was worth more than $30 billion at its height, and the stadium for the Miami Heat was renamed FTX Arena in 2021 after Bank-Friedman signed a 19-year deal with the stadium totaling $135 million. After the alleged crypto scam, the stadium will find a new name.

The cryptocurrency trading platform’s spectacularly swift downfall was preceded by a decision to lend $10 billion to prop up its sister hedge fund, Alameda, reported the Wall Street Journal. Alameda had previously lost a series of large-scale investments.

On Sunday, November 6, FTX experienced $5 billion in withdrawals, an amount the cryptocurrency trading platform could not support. This acted akin to a “run on the bank.” Unlike a bank, FTX does not have FDIC backing.

Bankman-Fried released a series of tweets that alerted customers the cryptocurrency trading platform would temporarily pause withdrawals in the wake of the large surge of withdrawals.

To recoup losses, Bankman-Fried turned to its crypto rival Binance. Binance temporarily sought to purchase FTX. However, Binance walked away from its deal with FTX and stated the company’s problems were “beyond our control or ability to help.”

Following the bankruptcy, New York federal prosecutors and the Department of Justice are investigating the collapse. Moreover, securities regulators in the Bahamas, where FTX is based, froze the company’s assets.

“We just don’t know the extent of contagion,” said Howard Fischer, a partner at law firm Moses Singer.

FTX, as a company, not only has ties with prominent celebrities but may also have deep political ties. Open Secrets lists FTX as a top political donor to the Democratic Party, second only to George Soros.

During the 2022 midterms, FTX reportedly donated just under $39 million to Democrat political action committees (PACs) such as Protect Our Future and Senate Majority, reported the Daily Wire.

Co-CEO Ryan Salame, on the other hand, appeared to donate to right-leaning organizations. Open Secrets reported Salame made a $12 million contribution to American Dream Federal Action, which supports candidates such as Ted Budd and Katie Britt.

Moreover, FTX’s political influence may have been global. Web archive sites depict images showing FTX advertisements on the World Economic Forum (WEF) website. The page shown in the photos has been allegedly erased.

Furthermore, the New York Post reported that Bank-Friedman was set to have been a speaker at the WEF meeting in Davos, Switzerland, in May, alongside Google founders.

Questions have also arisen over the crypto’s involvement with Ukraine, which allegedly invested heavily in FTX.

“Why on Earth the American taxpayer is funneling tens of billions of dollars over to Ukraine so that they can fight Russia — and why on Earth they would be involved, the Ukrainian government, with this now collapsed cryptocurrency exchange — we need to know,” asserted Miranda Devine, New York Post columnist, while on Tucker Carlson Tonight.

While federal investigators probe the extent of FTX’s alleged corruption, Berkman-Fried has already been compared to Bernie Madoff.

The former chair of the U.S. Federal Deposit Insurance Corporation, during the 2008 financial crisis, Sheila Bair, told CNN that both Madoff and Berkman-Fried developed strong connections with influential forces to avoid scrutiny.

“Charming regulators and investors can distract [them] from digging in and seeing what’s really going on,” said Bair of Berkman-Fried. “It felt very Bernie Madoff-like, in that way.”

Federal regulators scramble to recover the billions lost in the alleged crypto scam. In the meantime, Fischer urges investors not to hold their breath.

“The first ring of victims are the people who had assets held in FTX,” he explained. “They are probably not going to be made whole or anywhere close to it.”

In the wake of FTX’s collapse, federal regulators plan to crack down on cryptocurrency exchanges.