Why FTX Is Called the “Biggest Crypto Scam in USA” History

FTX is considered one of the most shocking and controversial events in the crypto industry. The exchange was previously known for trading and investing, but its collapse in November 2022 proved to be a nightmare for the global crypto community. The FTX collapse wiped out an estimated $8 to $9 billion worth of customer funds. This massive loss was devastating for both retail and institutional investors.

FTX is often called the largest crypto scam in the USA because of the massive fraud and unethical practices exposed in its operations and management.

FTX Review – Rise and Fall

FTX was a cryptocurrency exchange run by Sam Bankman-Fried (SBF). The platform offered spot and derivatives trading and was popular with global investors. FTX was known for its user-friendly interface, high liquidity, and aggressive marketing with celebrity endorsements.

The exchange’s mission was to provide a secure and efficient crypto trading platform — but its internal management and financial practices were secretly fraudulent. The collapse of FTX highlighted the critical importance of credibility and regulation in the crypto market.

Wipeout of Customer Funds

At the time of FTX’s collapse, an estimated US$8 to US$9 billion in customer funds were missing and mismanaged. Thousands of accounts were frozen, and investors were unable to recover their savings and investments.

This enormous fund wipeout was a wake-up call for the entire market, forcing investors and institutions to rethink their due diligence and risk assessment practices.

Fraud and Mismanagement Exposed

• Customer deposits were secretly diverted to Alameda Research (SBF’s sister hedge fund)

• FTX used customer money for high-risk trades, venture investments, luxury purchases, and political donations

• False liquidity and solvency statements were published

• Internal accounting records were deliberately misleading

• No proper segregation of customer funds

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Legal Action Against Sam Bankman-Fried (SBF)

After the collapse, the US government indicted Sam Bankman-Fried. In November 2023, a New York court found SBF guilty on all counts including wire fraud, securities fraud, and conspiracy.

He was sentenced to 25 years in prison and ordered to pay billions in restitution. The prosecution sent a powerful message: fraud in crypto will be punished at the highest level.

Market Impact of FTX Collapse

• Bitcoin dropped below $16,000 — the lowest since 2020

• Global crypto market lost over $200 billion in days

• Investor sentiment turned extremely bearish

• Multiple exchanges and DeFi projects reassessed operations

• Triggered the “crypto winter” of 2022–2023

Key Factors Behind the FTX Scam

• Unauthorized use of customer deposits for Alameda Research

• Deceptive accounting and fake liquidity reports

• Lack of proper regulatory compliance and auditing

• Aggressive marketing and celebrity endorsements that built false trust

• High-risk leveraged trading that amplified user losses

Transparency & Regulatory Lessons from FTX

• Exchanges now prioritize internal audits and proof-of-reserves

• Customer fund segregation is mandatory

• Regulatory frameworks (MiCA, US bills) are being strengthened

• Investors demand transparency reports and third-party audits

Impact on Investors

Thousands of investors — both retail and institutional — lost their capital. Trust in centralized exchanges was shattered. Many now prefer self-custody (“Not your keys, not your crypto”) or regulated platforms only.

Current Situation in 2025

• Bankruptcy process ongoing — some funds being recovered

• Multiple lawsuits against FTX executives and promoters

• New strict regulations being implemented worldwide

• Exchanges now publish regular proof-of-reserves

Investor Precautions After FTX

• Only use exchanges with proof-of-reserves and audits

• Avoid platforms with affiliated trading firms

• Never keep large amounts on exchanges

• Be wary of celebrity-endorsed projects

• Use hardware wallets for long-term storage

FTX Wasn’t Just a Collapse — It Was the Biggest Fraud in Crypto History

$9 billion in customer funds stolen. One man convicted. An entire industry changed forever.

The lesson: Trust is expensive. Verification is priceless.

Why FTX Is Called the Greatest Crypto Scam in the US

• Largest amount of customer funds ever stolen (~$9 billion)

• Deliberate fraud by top leadership

• Massive global market impact

• High-profile trial and 25-year prison sentence

• Exposed systemic risks in unregulated exchanges

Conclusion

FTX is a historic and devastating scandal in the crypto industry — widely regarded as the biggest crypto scam in the USA. Misappropriation of customer funds, fraudulent accounting, and regulatory violations caused massive financial losses and market disruption.

Sam Bankman-Fried was convicted of fraud and conspiracy in November 2023 and sentenced to 25 years in prison. This action was a strong signal of accountability and justice for the crypto industry and investors.

The lessons from FTX emphasize transparency, regulatory compliance, risk management, and investor protection. Investors and institutions must strengthen their due diligence to protect themselves from similar scams and ensure the crypto market grows with sustainable trust and confidence.

Official Sources: U.S. Department of Justice – SBF Sentencing | FTX Bankruptcy Updates