The collapse of FTX in 2022 was the culmination of a crypto-horror story that was unprecedented.

CoinDesk also experienced a first. This time, unlike any other moment of failure in the history of crypto, we were at the epicenter as our reporting set off the events.

CoinDesk was left with a strange mix of good and bad news. The George Polk Award was given to CoinDesk for its coverage of FTX, including its egregious financial statements and chaotic corporate governance. CoinDesk has received more mainstream media recognition in the last 10 years than ever before.

This article is part of the “CoinDesk Turns 10 Series” which looks back at important stories in crypto history. This article about FTX and other scandals is our pick for 2022.

The FTX collapse shook every major crypto company, including DCG, CoinDesk, and its trading subsidiary Genesis. This unraveling led to discussions about CoinDesk ‘s potential sale.

The year 2022 was a very interesting one. Major companies such as Celsius, Terra/Luna, and Three Arrows Capital all collapsed.

The blues

Sam Bankman Fried was one of crypto’s biggest names before his scandal. He was a mainstay on Washington D.C.’s lobbying circuit, and appeared regularly on the front page of financial publications.

“Sam Bankman Fried was a real celebrity in crypto and when you reach that level of fame, people assume: yeah, he’s legit,” says Tracy Wang. She is one of CoinDesk’s award-winning reporters who, along with Ian Allison led the coverage of FTX’s crash.

Read more: The divisions in Sam Bankman Fried’s crypto empire blur on his Trading Titan Alameda balance sheet

Ian Allison’s exposed on Nov. 2, 2022 weak balance sheets at the FTX affiliated trading firm Alameda Research. This was the beginning of both companies’ demise. Alameda Research, despite SBF repeatedly claiming it was completely separate from FTX, depended heavily on tokens that FTX created and, most importantly, the money of its users.

Until then, the majority of stories about FTX focused on the founder’s extensive lobbying activities as well as FTX plans to introduce its own stablecoin.

The exchange made headlines for its revenue, which was out of the blue the year before. It also hired celebrities to be brand ambassadors and partnered with music and sports events. FTX grew to be a powerful force in cryptopolitics, with SBF doing rounds around Washington D.C. and FTX becoming a member of mainstream trade groups like the International Swaps and Derivatives Association.

Allison now says that at first, CoinDesk’s findings about Alameda’s wrongdoings didn’t seem to be something “cataclysmic”. It didn’t feel like he revealed anything so seismic. Wang said that even as the dominos began to fall, “Sam seemed to be able fix it.”

Allison: “We were surprised that the FTT token accounted for so much of Alameda’s balance sheet, but we didn’t expect it to be zero.”

Read more: CoinDesk turns 10 – Mt. Gox: The Greatest Bitcoin Hack is Still Important

It did. After Allison’s scoop the CEO of Binance (FTX’s rival) announced that he would sell the FTT Binance held, lowering its price. The next 24 hours were akin a bankrun on FTX. Users withdrew 6 billion dollars from FTX.

In less than a week, FTX went from a crypto-powerhouse purchasing troubled competitors into a failing company desperate to selling itself Binance. Then they filed for bankruptcy.

It was revealed that SBF and his close friends were running both FTX, and Alameda, and they shared the same Bahamas mansion with no clear separation between their personal, professional and romantic relationships. The “gang in the Bahamas,” according to Tracy Wang’s article, ruled FTX as they saw fit with little accountability and transparency.

Read more about Bankman-Fried’s Cabal of roommates in the Bahamas who ran his crypto empire – and dated. There are many questions from other employees

The new FTX CEO John J. Ray III stated in the bankruptcy proceedings, “the FTX group was tightly controlled by a few individuals who showed little to no interest in instituting a proper oversight or control framework.”

Ray wrote that they “combined and misused corporate funds and customer money, lied about their business to third parties, made jokes internally about their tendency of losing track of millions in assets and thereby caused FTX to collapse as quickly as it had grown.”

“We were shocked to learn that FTX was insolvent: Wow, this fraud was happening right before our eyes, and everything we thought we knew about FTX turned out to be a lie,” Wang said. FTX employees “were just as shocked as we were,” and “many felt betrayed” by Sam.

Click here to read: 8 Days in Novembre: What led to FTX’s Sudden Collapse

Well-kept secret?

Allison claims that even though things seemed bright for FTX before it fell, some market players could detect something suspicious about the operations of Alameda. He said it was no secret that Alameda performed market-making services for FTX. This showed that, if the two companies were technically separate, they worked closely together.

Allison says that around September 2022 one of his sources mentioned briefly that Alameda’s balance sheet was “weaker” than people thought. Allison then talked to other sources and “one of them who had clearly been trading with Alameda gave more recent snapshots,” he said. Allison says that the snapshots showed how weak Alameda’s balance sheet was, and how closely Alameda was tied to FTX.

In a sense, it was not surprising. Allison stated that “the whole crypto market at the time was in a very vulnerable position.” Market crash and multiple crypto bankruptcy of 2022 were a hard hangover from the intoxicating bull-market of 2021 when ambitions, arrogance and the crypto-verse had gone off the charts.

Read more: CoinDesk turns 10: What we learned from reporting a decade of crypto history

Do Kwon, the founder of terraUSD stablecoin (now in jail) , and Three Arrows Capital Fund (now bankrupt), teased Twitter with promises of an infinite growth of crypto or ‘supercycle.’

The awakening was brutal. Do Kwon’s algorithmic UST lost the peg to the dollar in May 2022 and crashed. This revealed the poor design of Do Kwon’s coin and cast a shadow on algorithmic stablecoins. Three Arrows Capital (3AC), a company that had heavily invested in UST and LUNA’s sister cryptocurrency, , filed for bankruptcy.

It was soon discovered that some of the biggest players in the crypto-market had invested too much and trusted 3AC’s success. Companies like Voyager Genesis BlockFi Celsius were also underwater and declared bankruptcy. FTX is the most recent addition to the list. However, it’s also the most spectacular, considering the ambitions and fame of Sam Bankman Fried.

Wang said that before the crash some market participants could see Alameda falling in the ongoing purge of the industry: “A number of people thought that Alameda may have been more leveraged than they had assumed, and they were afraid that it could have become another 3AC situation,” she stated.

SBF’s “effective altruism” revealed his ambitious ambitions, and willingness to achieve FTX at all costs.

“Sam was a real envelope-pusher. This kind of risk-taking allowed FTX to become wildly popular in a short time. But it caught up with him, Wang said.

Sam Bankman – Fried outside the court on February 9,2023 (Liz Napolitano/CoinDesk).

The Aftermath

The FTX collapse had consequences that were just as large as the success it used to have – or bigger. The regulators were very frustrated, as they had talked to SBF, and assumed that FTX, like everyone else, was a responsible, well-run business. After the failure of FTX in D.C., as lobbyist Kristin said at this year’s Consensus Festival on stage, “decision-makers realized they couldn’t distinguish a good guy or a bad one.”

Some people have linked the FTX crash to the recent wave de-banking of crypto. The financial institutions that the industry relied upon – Signature Bank Silicone Value Bank and Silvergate Bank – were closed down by regulators leaving crypto clients scrambling to find alternatives.

Oliver von Landsberg Sadie, CEO and founder of BCB Group, also spoke at the Consensus. He said that the Securities and Exchange Commission had used “chemotherapy” to treat a 14 billion “Ponzi cancer,” and this affected even the “healthy parts” of the system.

Also included in this series: How the DAO hack changed Ethereum and Crypto

FTX made crypto relevant to people who had never been interested in it before. The failure of FTX made people question the virtues of this industry even before they knew anything positive about it. The context of the story is important.

To a mainstream reporter, Alameda’s balance sheet may not have said much, as few people know what FTT and SRM are, or why they’re non-liquid.

She said that CoinDesk broke the story because they knew how to use the balance sheet.

We also knew that FTX wasn’t the first crypto giant to fail and it won’t the last – take a look at the other stories from CoinDesk 10th anniversary. The death of a company does not mean that the technology behind it and its revolutionary potential for the world is dead.

Crypto skeptics were proven to be right for a good reason this time. How many crypto firms might operate under the same flimsy conditions as FTX or Alameda and would collapse immediately if someone exposed them the way CoinDesk has?

Allison laughs and says, “Don’t Ask!”

Ben Schiller is the editor.