FTX collapse refers to the collapse of the cryptocurrency exchange FTX in 2022. The FTX exchange was founded in 2019 by Sam Bankman-Fried and Gary Wang^[1]; before the exchange’s collapse, the FTX Foundation was a major source of funding for effective altruist projects.

History of the collapse

On November 2nd, 2022, FTX filed for bankruptcy following a revelation that Alameda – a trading firm also co-founded by Bankman-Fried^[2] – held a substantial portion of its assets in FTT, the crypto token issued by FTX^[3]. It was disclosed that FTX held less than $1 billion in liquid assets while facing liabilities of $9 billion^[4]. Bankman-Fried, former Alameda CEO Caroline Ellison, and former FTX executive Gary Wang are facing multiple charges, including fraud and conspiracy to money-launder. Bankman-Fried's trial is scheduled for October 2023.^[5]

Following the bankruptcy, holders of FTX’s token FTT lost their deposits, with Reuters reporting that at least $1 billion of customer funds vanished^[6].

Effects on the effective altruism community

The collapse has also affected the effective altruism community. The FTX foundation had been a major EA funder, and some are worried that some grants will be subject to clawbacks^[7]. Sam Bankman-Fried had also spoken publicly about his interest in effective altruism^[8], resulting in some negative press about effective altruism following the collapse. 

Some are also concerned that Bankman-Fried’s risky or illegal activities were encouraged or validated by his utilitarian philosophy, his expected-value reasoning^[9], his commitment to earning-to-give, or other EA-related motivations; some critics suggest that this should make us more skeptical about those philosophies. There have also been criticisms of EA leaders, who are alleged to have ignored early warning signs about Bankman-Fried.^[10]