FTX Crypto Crash

Overview

FTX Crypto Crash refers to a series of events in November 2022 that saw FTX.com, the third-biggest cryptocurrency exchange, file for bankruptcy and subsequently bring down the values of many other cryptocurrencies along with it. The fallout from the failure of FTX exposed probable wrongdoing and criminal behavior among the people running the firm, particularly allegations against CEO and founder Sam Bankman-Fried. The FTX crash also sparked widespread discourse and memes poking fun at the event across social media, as well as at crypto in general following the 2022 Crypto Crash months earlier.

Caroline Ellison was also discussed in relation to the FTX crash for being the CEO of Alameda Research, a quantitative trading firm founded by Sam Bankman-Fried. Ellison was reportedly Bankman-Fried's ex-girlfriend and Bankman-Fried with FTX's funds had allegedly loaned Alameda "$10 billion of customer funds" despite Alameda eventually failing. Post-crash, Caroline Ellison's Tumblr page worldoptimization surfaced in discourse due to her blog posts about polyamorous love, sexuality and business prowess.

Background

FTX was founded in 2019 by Sam Bankman-Fried and his partners as a cryptocurrency exchange. Initially, people could perform ostensibly secure trades of many cryptocurrencies using the FTX platform and the platform would collect transaction fees. FTX essentially operated like a bank for cryptocurrency, allowing users to move money around and invest. FTX also created its own cryptocurrency, called FTT.^[1]

Throughout 2020 and 2021, FTX raised massive amounts of money from investors and received a lot of buzz in the financial press. Much of this buzz centered around Bankman-Fried (nicknamed SBF) himself, who seemingly charmed reporters and investors by playing the part of a brilliant tech founder.^[17]

Around the same timeframe, Bankman-Fried and friends owned another company, Alameda Research, which ostensibly operated as a hedge fund trading on the FTX exchange and other places. The cover of the August 2022 issue of Fortune magazine compared SBF to Warren Buffet (seen below).^[2]

Following the significant crypto crash in May 2022, the entire cryptocurrency space was shaken by plummeting prices and decreased investment. An increasingly grim economic outlook, as well as rate hikes by central banks around the world, led to investors being more hesitant to invest in risky ventures like cryptocurrency. As fewer people invested, many firms felt the pinch as money dried up and numerous cryptocurrency tokens plummeted in value.

FTT Scam Allegations and FTX Crash

On November 6th, 2022, CZ, the founder of Binance (a rival cryptocurrency exchange) tweeted that he had sold his shares of FTT, the cryptocurrency issued by FTX (seen below).^[3] According to his explanation, this was because documents published in the press showed Alameda Research possessed the majority of FTT cryptocurrency in circulation, suggesting Bankman-Fried might be running a scam.

According to the allegations, the scam purportedly operated like this: FTX would mint FTT cryptocurrency and then give it to Alameda. Alameda would then borrow actual money and other cryptocurrencies using the free FTT as collateral. In this way, Bankman-Fried would, allegedly, print his own valueless cryptocurrency and then exchange it for real money, earning billions.^[4]

After CZ sold his FTT, many others followed suit and it was then revealed that FTX did not have enough actual money liquidity for them to convert their FTT into dollars. The company rapidly plummeted in value (seen below), as did almost every cryptocurrency, and investors found themselves unable to withdraw the money they had invested.

Developments

SBF Apology

On November 10th, 2022, SBF then tweeted a lengthy apology thread to his followers, saying that he hoped to pay back everybody. The thread began (seen below, left) with an apology and ended (seen below, right) with an all-caps disclaimer that SBF didn't want anything he'd said to be used against him in court.^[5]

FTX and Alameda File for Bankruptcy

On November 11th, SBF tweeted that Alameda and FTX would both file for bankruptcy (shown below). However, he continued to say that the company would do its best to pay back people who had lost money.^[6]

On November 13th, reports of a hack of FTX and the loss of some of the remaining money were reported.^[7] Many suspected Bankman-Fried, finding the timing fishy. Twitter user @ParikPatelCFA tweeted a meme (seen below) on November 12th to this effect, earning just under 12,000 likes in roughly 24 hours.^[8]

Vox DMs Leak

On November 16th, 2022, a series of DMs between Sam Bankman-Fried and Vox journalist Kelsey Piper was published on the Vox Media site. Piper is one of the core writers at Future Perfect, a division of Vox funded and inspired by the Effective Altruism movement. SBF was a major donor to Effective Altruism, and Piper has been involved in the philosophy since she was a student at Stanford. Last year, Piper also notably wrote a profile of SBF for Vox's Future Perfect.

In the article published on November 16th, 2022, Piper claims SBF sent her a DM the day before on November 15th and they had an hour-long conversation via text. After confirming with SBF that his account hadn't been hacked, Piper shared screenshots of their conversation in the Vox article titled "Sam Bankman-Fried tries to explain himself."

In their discussion, SBF said that the entire scam had been a mistake and entirely unintentional, while also stating that he regretted filing for bankruptcy. He sketched out a view of ethics opposed to the "game we woke westerners play," arguing that all which really matters is who wins and who loses and saying all the things he'd said before about morality were "bs" (seen below).^[29]

On the evening of the 16th, after the DMs were published on Vox's website, SBF then composed a long tweet thread that began by tweeting "What," then spelling out "HAPPENED" one letter at a time (seen below, left) describing his efforts to pay back customers and investors. He linked to the "A Softer World" webcomic series to describe his feelings and expressed regret about the release of his DMs to Vox. He reiterated that he hoped to get everybody's money back to them (seen below, right).^[30]

Online Reactions

As word of the FTX crash spread in mid-November 2022, many online reactions described the despair and fear felt by cryptocurrency investors as they lost money. For example, Twitter user @hrapekkscalp tweeted one such meme on November 12th, 2022, earning just over 1,000 likes in 24 hours (seen below, left).^[9] Others, like user @CryptoGodJohn in a November 11th post that accumulated almost 2,000 likes in 48 hours, focused on Sam Bankman-Fried, blaming him for tanking the cryptocurrency markets (seen below, right).^[10]

Around this same timeframe, many online seemingly opposed to the Biden administration promoted an unproven conspiracy theory that FTX and Bankman-Fried were part of an Iran Contra-style money laundering scheme. For example, TikToker^[18] 3rdeyevib3s posted a video about this theory on November 14th, 2022, receiving nearly 10,000 views and 1,000 likes in 10 hours (seen below).

Some proposed that because the government of Ukraine partnered with FTX to set up a cryptocurrency "Aid for Ukraine" site where people could donate crypto in March 2022, the Ukrainian government was allegedly complicit with Bankman-Fried's schemes and helping funnel government money into Biden's campaign (to which Sam Bankman-Fried was a major donor). However, there is no record of this happening as of mid-November 2022.

Tom Brady FTX Memes

Many online reactions centered around Bankman-Fried's relationships with powerful people, and the level of power and wealth he'd accrued at the helm of FTX. Many remembered the heavy publicity and celebrity endorsements that surrounded FTX. Particularly, a Super Bowl 2022 FTX ad featuring Tom Brady led many to wonder how the famous football player would respond to the news. Twitter user @algoflows tweeted a meme of Brady on November 9th (seen below), which earned just over 11,000 likes in three days.^[11]

Various posters brought up SBF's family as well. For example, a viral 4chan screenshot sketched out alleged connections between SBF's mother and powerful Democrats (seen below, left), while a string of questions by Twitter user @RamonGovea earned 300 likes on November 11th (seen below right).^[12][13]

Some also brought up Caroline Ellison, the CEO of Alameda Research, who was purportedly a romantic partner of SBF and lived with him in the Bahamas. Many other key figures at FTX and Alameda lived in the same mansion and were supposedly romantically linked in a polyamorous arrangement.^[14] For example, Twitter user @alifarhat79 posted a For The Better, Right? meme describing their relationship, which earned over 2,100 likes in less than a day on November 12th, 2022.^[15]

A number of other memes focused on how the media might react to the story. For example, Twitter user @wallstmemes posted in anticipation of a Netflix Adaptation, earning over 27,000 likes on November 12th (shown below).^[16]

Caroline Ellison, CEO of Alameda Research

After the FTX crash, discourse surfaced around 28-year-old Caroline Ellison who became the CEO of Alameda Research in August 2022.^[19] Alameda Research was founded by Sam Bankman-Fried in 2017.^[20] Ellison and Bankman-Fried became friends after their parallel college graduations in 2015 and 2016. Reported on by the New York Times^[21] after the FTX crash, an anonymous source levied that Ellison had admitted that FTX used customer money (roughly $10 billion) to help Alameda meet its liabilities and that she, Bankman-Fried, and two other FTX executives knew this.

Caroline Ellison's Tumblr Page Worldoptimization

Despite many memes being made using images of Caroline Ellison, specifically using one photo of her in a Bahamas skyscraper,^[22] discourse about Ellison's since deleted Tumblr^[23] page worldoptimization surfaced in mid-November 2022 due to the FTX crash and the alleged polycule between the employees and executives. On November 12th, 2022, Twitter^[24] user AutismCapital shared a screenshot of a worldoptimization Tumblr post, writing in the tweet's caption, "Caroline has a tumblr called 'worldoptimization.' Her kink is men who control most major world governments." The tweet received roughly 7,300 likes in three days (shown below). The featured Tumblr post outlined Ellison's opinions on "cute boy things," listing, "controlling major world governments" as one.

After Ellison's Tumblr surfaced on Twitter, she soon deleted it. However, Twitter user AutismCapital shared an Internet Archive link^[23] to the Tumblr captured before its deletion.

Multiple Twitter^[25][26] users surfaced more worldoptimization Tumblr posts and many people read her posts and started to humorously idolize Ellison by labeling her akin to girlboss signifiers. For instance, on November 13th, 2022, Twitter^[27] user testinprodcap debunked worldoptimization's polycule post^[28] and then stated, "Caroline is very based," gaining roughly 1,500 likes in two days (shown below, left). Also on November 13th, Twitter^[27] user wiki_early_life yassified Ellison, gaining roughly 1,900 likes in two days (shown below, right).

Search Interest

External References