The most dangerous fraud is not the one that looks like a fraud. It is the one that looks like the future.
Sam Bankman-Fried wore cargo shorts. He drove a Toyota Corolla. He slept on a beanbag in the office. He talked about giving away his entire fortune. Sequoia Capital called him a genius. Regulators trusted him. The press loved him. And behind all of it, he was spending his customers' money. Eight billion dollars. That is the FTX autopsy.
— The Vulture
THIS WEEK'S AUTOPSY
FTX launched in 2019 as a crypto exchange. By 2021 it had over a million users, a $32 billion valuation, and Sam Bankman-Fried on magazine covers testifying before Congress about crypto regulation. He was thirty years old and worth an estimated $26 billion on paper. Behind the paper was a different story.
FTX had a sister company — a hedge fund called Alameda Research, also founded by Bankman-Fried. And Alameda had a secret. It had a special account on FTX that could go negative, infinitely, without triggering any of the automatic safeguards that would have stopped any other user. Normal customers could not trade beyond their balance. Alameda could keep spending. Customer money. Without permission. Without disclosure. For years.
By 2022 Alameda had lost billions on bad trades. Rather than absorb the losses, they kept drawing from the account. Eight billion dollars of customer funds. Gone.
The collapse began with a spreadsheet. On November 2, 2022, a crypto publication called CoinDesk published a leaked document — Alameda's balance sheet. Its largest asset was not cash, not Bitcoin. It was FTT, a token created by FTX itself. Two companies propping each other up with the same imaginary number.
Rival exchange Binance saw it. On November 6, Binance announced it would sell all of its FTT holdings. The price collapsed. Six billion dollars in customer withdrawal requests hit FTX in seventy-two hours. FTX could not pay. Binance offered to buy FTX and walked away the next day after seeing the books.
On November 11, 2022, FTX filed for Chapter 11. One hundred and thirty affiliated companies. Eight billion dollars in customer funds simply gone.
The man brought in to clean up the wreckage was John Ray the Third, the same man who had unwound Enron. He said he had never seen anything like it. SBF was convicted on seven counts of fraud and conspiracy and sentenced to twenty-five years. He is thirty-two years old.
The customers? The bankruptcy estate recovered enough that creditors are expected to receive close to full repayment based on 2022 prices. Which means they get their dollars back, but missed one of the greatest bull markets in crypto history, while their money was being spent on Bahamian real estate and political donations. That is the FTX autopsy. Full episode is on YouTube now — link below.
THE WATCHLIST
Three companies showing distress signals right now. Not financial advice. Do your own research.
Celsius Network filed Chapter 11 in 2022 and emerged under new ownership in 2024. The watch is on whether the restructured entity can operate in a regulatory environment that did not exist when the original model was built.
Genesis Global is the crypto lending arm of Digital Currency Group and filed Chapter 11 in 2023. The watch is on creditor recovery outcomes and whether the parent company can isolate the contagion.
WeWork filed Chapter 11 in November 2023 and emerged in 2024 with a restructured balance sheet. The watch is on whether flexible office demand can support the unit economics that never worked at the old cost structure.
THE VULTURE'S PICK
Every issue I share one tool or resource I actually use in my research. Coming in the next issue.
— The Vulture
NEW ON YOUTUBE
This week's episode is live now.
Sam Bankman-Fried Raised $32 Billion. None of It Was Real.
How FTX built a secret back-end that let Alameda Research spend customer funds without a paper trail, how a leaked balance sheet triggered a $6 billion bank run in seventy-two hours, and why the man who cleaned up Enron said he had never seen anything like it.
Watch it here: https://www.youtube.com/@thewallstreetvulture
BEFORE YOU GO
Next Tuesday I'm releasing the next autopsy. This one is about a company that was the seventh largest in America — one that won every award, fooled every analyst, every auditor, every regulator, until one person actually read the footnotes. The collapse that changed how the world thinks about corporate fraud. That is the Enron autopsy. Tuesday, 7:00am Eastern.
— The Vulture