What Was FTX? An Overview of the Exchange

FTX Exchange operated as a centralized cryptocurrency exchange that listed spot markets, derivatives, options, volatility contracts along with leveraged products. Sam Bankman-Fried, a Massachusetts Institute of Technology graduate and former Jane Street Capital exchange traded fund trader, founded the company in 2018.

The group maintained two trading arms. FTX International, domiciled in the Bahamas, served global customers. FTX US, a separate legal entity, limited access to United States residents. During the first week of November 2022, FTX International, FTX US in addition to every satellite company under their control collapsed into bankruptcy.

FTX filed for Chapter 11 protection in Delaware federal court on 11 November 2022. A criminal jury in Manhattan convicted Sam Bankman-Fried on seven counts of fraud and conspiracy. Evidence showed that he misappropriated at least eight billion dollars in customer deposits to cover losses at Alameda Research, a hedge fund he also controlled. The court sentenced him to twenty five years in federal prison.
The exchange listed Bitcoin, Ether, Solana next to hundreds of lesser known tokens - it also hosted non fungible token auctions and supported spot, futures, leveraged positions. FTX never offered equity shares to the public. It issued a proprietary token called FTT that traded on cryptocurrency markets.

Can You Buy FTX Stock?

FTX equity never reached public markets. Retail speculators purchased the FTT token instead. Holders used the token to pay trading fees and to post margin collateral. After the bankruptcy filing, the token lost utility. Court-appointed liquidators now treat FTT as an estate asset that will be sold to repay creditors.

FTX Digital Markets Ltd. incorporated in Antigua but also Barbuda and maintained headquarters in Nassau, Bahamas. The Securities Commission of the Bahamas licensed the unit. The license barred the company from offering services to United States residents.

United States residents transacted through FTX US, a Delaware corporation that registered as a money services business with the Financial Crimes Enforcement Network.

Although the two companies kept separate capital structures, they shared management, investors, promotional campaigns, and brand assets. Sam Bankman-Fried served as chief executive officer of both entities. Gary Wang held the title of chief technology officer in each firm.

Every participant in FTX Series C also subscribed to FTX US Series A. The roster included Temasek, Paradigm, Ontario Teachers’ Pension Plan Board, NEA, IVP, SoftBank Vision Fund 2, Lightspeed Venture Partners, Steadview Capital, Tiger Global along with Insight Partners.

The companies paid venture capitalist Kevin O’Leary and professional basketball player Stephen Curry for promotional appearances. Both spokespeople received equity compensation.

FTX purchased naming rights to the Miami Heat basketball arena and to the University of California, Berkeley football stadium. The agreements rebranded the venues as FTX Arena besides FTX Field.

Account creation required an email address, a password that contained at least one uppercase letter, one lowercase letter, one numeral in addition to one special character, and a second factor device. The exchange froze withdrawals for twenty four hours after any password or two factor authentication change. Subaccounts allowed multiple users to operate under a single master account. Administrators set granular permissions that restricted trading, deposits, or withdrawals to specific IP addresses or wallet addresses.

Read-only subaccounts permitted viewing historical activity without placing orders or moving funds.

Real-time anti-money-laundering software monitored deposits and withdrawals. Algorithms flagged transactions that exceeded predefined thresholds or that exhibited unusual velocity patterns. Users completed a Know Your Customer workflow that required government issued photo identification, proof of address next to a live facial scan before receiving full access to trading, deposits, withdrawals.

The exchange maintained a Backstop Liquidity Fund that it valued at roughly two hundred million dollars. Marketing material claimed the fund would reimburse users for losses caused by system outages or security breaches.

The platform supported market, limit, stop, stop limit - trailing stop, take-profit along with take-profit limit orders. Desktop and mobile applications gave access to spot pairs, quarterly and perpetual futures, European-style call and put options, leveraged tokens in addition to MOVE contracts.

Retail and institutional traders routed orders through pairs such as BTC/USDT, ETH/USDT, XRP/USDT next to FTT/USDT.
Futures: More than one hundred quarterly and perpetual futures pairs listed Bitcoin, Ether, Solana, other tokens. Margin reached twenty-to-one. Positions could be opened long or short.
Leveraged Tokens: Tokens such as BULL, BEAR along with HEDGE gave up to three times leveraged exposure without margin requirements. A three times long Bitcoin token rose thirty percent if Bitcoin rose ten percent from the purchase price.
Options: European call and put options quoted strike prices and expiry dates for Bitcoin, Ether in addition to Solana. Holders retained the right, not the obligation, to buy or sell the underlying at expiry.
MOVE: MOVE contracts paid out the absolute value of the price change in Bitcoin, Ether, or XRP over a specified time window, regardless of direction.

FTX US listed dozens of spot cryptocurrency pairs against the United States dollar and operated an NFT marketplace.

FTX International accepted deposits and processed withdrawals in nine fiat currencies - United States dollar, euro, British pound, Australian dollar, Canadian dollar, Swiss franc, Brazilian real, Ghanaian cedi next to Argentine peso. FTX US supported only United States dollar deposits and withdrawals.

The exchange supported limited Turkish lira or Japanese yen functionality. Road-map documents promised future support for Hong Kong dollar, Singapore dollar, South African rand.

Important

Market takers paid between 0.04 percent and 0.07 percent in trading fees. Market makers received rebates between 0.01 percent and 0.02 percent. Leveraged tokens carried a 0.10 percent creation and redemption fee and a 0.03 percent daily management fee.

Cryptocurrency deposits arrived free of charge. Bitcoin withdrawals above 0.01 BTC incurred no fee. One withdrawal below 0.01 BTC per day was free. Additional small Bitcoin withdrawals cost 0.1 percent. Fiat withdrawals via wire transfer cost thirty dollars for United States dollar, euro along with British pound. Other fiat withdrawals cost seventy five dollars.