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  "id": "ftx-collapse",
  "canonical": "https://degreesofsatoshi.com/encyclopedia/ftx-collapse/",
  "collection": "bitcoin",
  "title": "The collapse of FTX: the run, the bankruptcy, and the 25-year sentence",
  "description": "FTX, a crypto exchange, collapsed in November 2022 when customer money turned out to be missing. What happened, what courts found, and why Bitcoin kept running.",
  "aliases": [
    "FTX collapse",
    "what happened to FTX",
    "Sam Bankman-Fried",
    "FTX bankruptcy",
    "Alameda Research",
    "FTX customer funds",
    "SBF sentence"
  ],
  "dates": {
    "published": "2026-09-23",
    "modified": "2026-10-02",
    "verified": "2026-10-02T16:01:48.343Z",
    "dataAsOf": null
  },
  "authorship": {
    "publisher": "Degrees of Satoshi editorial project",
    "process": "AI-assisted research and drafting with a separate automated source-verification pass; no external expert or named human review is implied."
  },
  "quickAnswer": {
    "text": "FTX was a centralized crypto exchange that entered bankruptcy in November 2022. A US jury convicted Sam Bankman-Fried of fraud and conspiracy in November 2023, and he was sentenced to 25 years in March 2024. The cited proceedings describe misuse of customer funds through FTX and Alameda Research. Holding an exchange account exposed customers to that company’s custody and controls, separately from Bitcoin’s transaction-validation rules.",
    "claimId": "ftx-collapse-quick-answer",
    "sourceIds": [
      "doj-verdict-2023",
      "doj-sentence-2024",
      "cftc-release-2022"
    ]
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  "keyFacts": [
    {
      "label": "FTX operations",
      "value": "FTX began operating around May 2019; Bankman-Fried was its founder and CEO",
      "sourceIds": [
        "cftc-release-2022"
      ],
      "id": "ftx-operations",
      "claimId": "ftx-collapse-fact-ftx-operations"
    },
    {
      "label": "The run",
      "value": "6 November 2022 Binance said it would sell its FTT; 8 November FTX paused all withdrawals",
      "sourceIds": [
        "sec-complaint-2022"
      ],
      "id": "the-run",
      "claimId": "ftx-collapse-fact-the-run"
    },
    {
      "label": "Bankruptcy",
      "value": "11 November 2022; Bankman-Fried resigned and about 100 FTX entities filed for Chapter 11",
      "sourceIds": [
        "sec-complaint-2022",
        "ray-testimony-2022"
      ],
      "id": "bankruptcy",
      "claimId": "ftx-collapse-fact-bankruptcy"
    },
    {
      "label": "Regulators and prosecutors",
      "value": "13 December 2022: SEC and CFTC civil complaints, and a criminal indictment unsealed in Manhattan",
      "sourceIds": [
        "cftc-release-2022",
        "doj-charges-2022"
      ],
      "id": "regulators-and-prosecutors",
      "claimId": "ftx-collapse-fact-regulators-and-prosecutors"
    },
    {
      "label": "Customer losses",
      "value": "More than $8 billion, per the CFTC and the Justice Department",
      "sourceIds": [
        "cftc-release-2022",
        "doj-sentence-2024"
      ],
      "id": "customer-losses",
      "claimId": "ftx-collapse-fact-customer-losses"
    },
    {
      "label": "Verdict",
      "value": "Guilty on all seven counts, 2 November 2023",
      "sourceIds": [
        "doj-verdict-2023"
      ],
      "id": "verdict",
      "claimId": "ftx-collapse-fact-verdict"
    },
    {
      "label": "Sentence",
      "value": "25 years in prison and forfeiture of over $11 billion, 28 March 2024",
      "sourceIds": [
        "doj-sentence-2024"
      ],
      "id": "sentence",
      "claimId": "ftx-collapse-fact-sentence"
    },
    {
      "label": "Announced distribution",
      "value": "The Trust announced a 30 September 2025 distribution that would bring eligible Class 5A claims to 78% and Class 5B claims to 95% cumulatively; receipt depended on eligibility and processing",
      "sourceIds": [
        "ftx-recovery-trust-2025"
      ],
      "id": "announced-distribution",
      "claimId": "ftx-collapse-fact-announced-distribution"
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  "prerequisites": [],
  "sections": [
    {
      "id": "what-ftx-was",
      "heading": "FTX was an exchange, which means it held other people’s money",
      "sourceIds": [
        "cftc-release-2022",
        "ray-testimony-2022"
      ],
      "paragraphs": [
        "FTX was a cryptocurrency exchange: a company where customers deposited dollars and coins and traded them on its platform. The CFTC’s December 2022 release describes FTX’s operations beginning around May 2019 and identifies Bankman-Fried as its founder and CEO. It raised more than $1.8 billion from investors.",
        "The key fact about any exchange is that it holds your money for you. When you keep bitcoin on an exchange you do not hold the keys; the company does, and your balance is a promise. FTX told customers, in the SEC’s account, that their assets were kept safe and separate from the company’s own. Bankman-Fried also controlled a separate trading firm, Alameda Research, founded in 2017, which he said had no special access to the exchange.",
        "Both statements were untrue, a jury later found. Understanding why requires a little about how custody works, which our article on [Bitcoin wallets](/encyclopedia/bitcoin-wallets-explained/) covers, and a little about how exchanges have failed before, which our dossier on [the history of Bitcoin exchanges](/history/bitcoin-exchanges-history/) covers."
      ]
    },
    {
      "id": "the-run",
      "heading": "Nine days in November 2022",
      "sourceIds": [
        "sec-complaint-2022",
        "ray-testimony-2022"
      ],
      "paragraphs": [
        "The collapse began with a news story. On 2 November 2022, CoinDesk reported that a balance sheet it had obtained showed Alameda holding a very large position in FTT, a token issued by FTX itself. On 6 November the chief executive of Binance, a rival exchange, announced that Binance would sell its own FTT holdings, then worth more than $500 million, citing “recent revelations.” Customers began pulling money out of FTX.",
        "On 7 November Bankman-Fried tweeted that “FTX is fine. Assets are fine,” that the exchange did not invest client assets, and that it was processing all withdrawals. He later deleted the tweet. On 8 November FTX paused all customer withdrawals and the price of FTT fell by about 80 percent. The same day Binance announced a non-binding agreement to acquire FTX.com; on 9 November it withdrew after due diligence, citing reports of mishandled customer funds. The SEC says customers withdrew about $5 billion in a single day and that Bankman-Fried was seeking emergency funding to cover a shortfall of about $8 billion.",
        "On 10 November he tweeted an apology. On 11 November he resigned, and FTX and about 100 affiliated companies filed for Chapter 11 bankruptcy protection in the United States. John J. Ray III, whose career included the Enron bankruptcy, became chief executive in the early hours of that morning and later told Congress that his first act was to authorize the filings."
      ]
    },
    {
      "id": "where-the-money-went",
      "heading": "Where the money went, according to regulators and the new CEO",
      "sourceIds": [
        "sec-complaint-2022",
        "cftc-release-2022",
        "ray-testimony-2022"
      ],
      "paragraphs": [
        "On 13 December 2022 the SEC and the Commodity Futures Trading Commission filed civil complaints in Manhattan. The SEC alleged that from the start of FTX’s operations, customer deposits had been sent into bank accounts controlled by Alameda, that Alameda had an effectively unlimited “line of credit” drawn from customer assets, and that Bankman-Fried used commingled customer funds for venture investments, real estate and political donations. The CFTC described an “allow negative flag” in FTX’s code that let Alameda trade and withdraw even when its account had no money in it, and put customer losses at more than $8 billion.",
        "The new chief executive was blunter. Testifying to the House Financial Services Committee on 13 December 2022, Ray said that in more than 40 years of restructuring work, “never in my career have I seen such an utter failure of corporate controls at every level of an organization.” He listed what he had found: senior managers with access to systems holding customer assets and no controls to stop them redirecting those assets, private keys to hundreds of millions of dollars of crypto stored without effective security, Alameda able to borrow customer funds “without any effective limits,” commingled assets, and no audited or reliable financial statements.",
        "These were allegations at the time, and the SEC and CFTC cases are civil. The criminal case is where the allegations became findings."
      ]
    },
    {
      "id": "the-cases",
      "heading": "Charges, a verdict and 25 years",
      "sourceIds": [
        "doj-charges-2022",
        "doj-verdict-2023",
        "doj-sentence-2024"
      ],
      "paragraphs": [
        "Bankman-Fried was arrested in the Bahamas on 12 December 2022, and the next day federal prosecutors in Manhattan unsealed an eight-count indictment charging wire fraud, conspiracy to commit commodities and securities fraud, money laundering conspiracy and campaign finance offenses. The US Attorney said it was “not a case of mismanagement or poor oversight, but of intentional fraud, plain and simple.” That was the prosecution’s claim; a jury had yet to weigh it.",
        "On 2 November 2023, after a one-month trial before Judge Lewis A. Kaplan, the jury convicted him on all seven counts it was asked to decide: two counts of wire fraud, two of wire fraud conspiracy, and conspiracies to commit securities fraud, commodities fraud and money laundering. On 28 March 2024, Judge Kaplan sentenced him to 25 years in prison, three years of supervised release and forfeiture of more than $11 billion. The Justice Department said he had misappropriated billions of dollars of customer funds, defrauded FTX investors of more than $1.7 billion and Alameda’s lenders of more than $1.3 billion, and had directed changes to FTX’s code so Alameda could withdraw “effectively unlimited amounts.”"
      ]
    },
    {
      "id": "customers",
      "heading": "A distribution announcement is not proof of every customer’s recovery",
      "sourceIds": [
        "ftx-recovery-trust-2025"
      ],
      "paragraphs": [
        "The FTX Recovery Trust announced a third distribution scheduled for 30 September 2025. Its class table described cumulative distributions of 78% for eligible Class 5A dotcom customer claims and 95% for eligible Class 5B US customer claims after that round. It specified eligibility requirements and expected processing time through distribution providers.",
        "These percentages are measured against allowed claims under the plan, not against a promise to return the original number of coins. An announcement of scheduled distribution is not evidence that every claimant received funds on that date. This entry does not treat that 2025 statement as a current balance of recoveries."
      ]
    },
    {
      "id": "not-bitcoin",
      "heading": "Why this was a company failure, not a Bitcoin failure",
      "sourceIds": [
        "cftc-release-2022",
        "ray-testimony-2022",
        "sec-complaint-2022"
      ],
      "paragraphs": [
        "It is worth being precise about what failed. FTX was a company that took custody of customers’ money and, according to the jury’s verdict, used it without permission. Bitcoin the network has no customers and holds nobody’s deposits; coins in a wallet whose keys you hold cannot be lent out by anyone else. The CFTC’s complaint says FTX marketed itself as “the safest and easiest way to buy and sell crypto.” What failed was that promise, made by a company, not the ledger underneath it.",
        "That is the same lesson as [the 2016 Bitfinex hack](/encyclopedia/bitfinex-hack-2016/) and the [collapse of Mt. Gox](/history/mt-gox-collapse/), and it is why the phrase “not your keys, not your coins” is repeated so often. Ray’s list of what FTX lacked, from audited accounts to controls on who could move customer assets, is a list of things any institution holding other people’s money needs and that Bitcoin itself never needed, because it never holds anything for anyone. Our guide to [private keys and seed phrases](/encyclopedia/private-keys-and-seed-phrases/) explains what holding your own coins actually involves.",
        "None of that makes the losses smaller for the people who trusted FTX. It does mean the right question after any exchange failure is not “did Bitcoin break?” but “who was holding the coins, and what did they do with them?”"
      ]
    }
  ],
  "faq": [
    {
      "question": "What caused FTX to collapse?",
      "answer": "A run. After a 2 November 2022 report about Alameda’s balance sheet and Binance’s 6 November decision to sell its FTT tokens, customers rushed to withdraw. FTX could not pay them because, as the SEC alleged and a jury later found, billions of dollars of customer deposits had gone to Alameda. Withdrawals were paused on 8 November and the company filed for bankruptcy on 11 November.",
      "sourceIds": [
        "sec-complaint-2022"
      ]
    },
    {
      "question": "Did FTX customers get their money back?",
      "answer": "The Trust’s 2025 announcement described planned distributions to eligible holders of allowed claims, with different percentages by class. Those claim recoveries are not equivalent to receiving the original coins, and the announcement alone does not establish payment to every customer.",
      "sourceIds": [
        "ftx-recovery-trust-2025"
      ]
    },
    {
      "question": "How long is Sam Bankman-Fried’s sentence?",
      "answer": "The Justice Department’s 28 March 2024 sentencing release records 25 years in prison, three years of supervised release and more than $11 billion in forfeiture. This article states that dated sentencing outcome and does not claim to provide a current appellate-status tracker.",
      "sourceIds": [
        "doj-sentence-2024"
      ]
    },
    {
      "question": "Did the FTX collapse mean Bitcoin failed?",
      "answer": "No. FTX was a company that held customer deposits and, according to the court record, misused them. The Bitcoin network holds no deposits and has no customers; what failed was FTX’s custody, controls and honesty, as its own replacement chief executive described in detail to Congress.",
      "sourceIds": [
        "cftc-release-2022",
        "ray-testimony-2022"
      ]
    }
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      "statement": "FTX was a centralized crypto exchange that entered bankruptcy in November 2022. A US jury convicted Sam Bankman-Fried of fraud and conspiracy in November 2023, and he was sentenced to 25 years in March 2024. The cited proceedings describe misuse of customer funds through FTX and Alameda Research. Holding an exchange account exposed customers to that company’s custody and controls, separately from Bitcoin’s transaction-validation rules.",
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          "locator": "Records the 2 November 2023 conviction and lists the seven counts with their maximum penalties."
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          "locator": "The 25-year sentence, supervised release and forfeiture of over $11 billion, the $1.7 billion and $1.3 billion investor and lender figures, and the altered code allowing unlimited Alameda withdrawals."
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          "sourceId": "source-5a31c2a5d93770ac",
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        "notes": [
          "Read SEC complaint, CFTC release, Ray testimony, DOJ charges/verdict/sentence and the recovery trust announcement. September 2025 payment percentages are scheduled conditional class distributions, not confirmation that every creditor was paid."
        ]
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          "Read SEC complaint, CFTC release, Ray testimony, DOJ charges/verdict/sentence and the recovery trust announcement. September 2025 payment percentages are scheduled conditional class distributions, not confirmation that every creditor was paid."
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        "notes": [
          "Read SEC complaint, CFTC release, Ray testimony, DOJ charges/verdict/sentence and the recovery trust announcement. September 2025 payment percentages are scheduled conditional class distributions, not confirmation that every creditor was paid."
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      "id": "ftx-collapse-fact-bankruptcy",
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        },
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          "sourceId": "source-55d329a733715988",
          "locator": "Ray’s sworn testimony: his appointment on 11 November, the Chapter 11 filings of over 100 entities, and his list of failed controls including commingling and unlimited Alameda borrowing."
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        "notes": [
          "Read SEC complaint, CFTC release, Ray testimony, DOJ charges/verdict/sentence and the recovery trust announcement. September 2025 payment percentages are scheduled conditional class distributions, not confirmation that every creditor was paid."
        ]
      }
    },
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      "id": "ftx-collapse-fact-regulators-and-prosecutors",
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          "locator": "Announces the CFTC complaint, the “allow negative flag,” the “safest and easiest” marketing claim, and customer losses of more than $8 billion."
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          "sourceId": "source-1d3f0751c8cca573",
          "locator": "The unsealed eight-count indictment, the arrest in the Bahamas the previous day, and the US Attorney’s “intentional fraud” statement."
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        "notes": [
          "Read SEC complaint, CFTC release, Ray testimony, DOJ charges/verdict/sentence and the recovery trust announcement. September 2025 payment percentages are scheduled conditional class distributions, not confirmation that every creditor was paid."
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          "sourceId": "source-5a31c2a5d93770ac",
          "locator": "Announces the CFTC complaint, the “allow negative flag,” the “safest and easiest” marketing claim, and customer losses of more than $8 billion."
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          "sourceId": "source-341f7d644fc43d12",
          "locator": "The 25-year sentence, supervised release and forfeiture of over $11 billion, the $1.7 billion and $1.3 billion investor and lender figures, and the altered code allowing unlimited Alameda withdrawals."
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        "notes": [
          "Read SEC complaint, CFTC release, Ray testimony, DOJ charges/verdict/sentence and the recovery trust announcement. September 2025 payment percentages are scheduled conditional class distributions, not confirmation that every creditor was paid."
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      "statement": "Verdict: Guilty on all seven counts, 2 November 2023",
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        {
          "sourceId": "source-83262ef82fa43bf9",
          "locator": "Records the 2 November 2023 conviction and lists the seven counts with their maximum penalties."
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        "notes": [
          "Read SEC complaint, CFTC release, Ray testimony, DOJ charges/verdict/sentence and the recovery trust announcement. September 2025 payment percentages are scheduled conditional class distributions, not confirmation that every creditor was paid."
        ]
      }
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      "id": "ftx-collapse-fact-sentence",
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      "statement": "Sentence: 25 years in prison and forfeiture of over $11 billion, 28 March 2024",
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          "sourceId": "source-341f7d644fc43d12",
          "locator": "The 25-year sentence, supervised release and forfeiture of over $11 billion, the $1.7 billion and $1.3 billion investor and lender figures, and the altered code allowing unlimited Alameda withdrawals."
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        "notes": [
          "Read SEC complaint, CFTC release, Ray testimony, DOJ charges/verdict/sentence and the recovery trust announcement. September 2025 payment percentages are scheduled conditional class distributions, not confirmation that every creditor was paid."
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    },
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      "id": "ftx-collapse-fact-announced-distribution",
      "articleSlug": "ftx-collapse",
      "statement": "Announced distribution: The Trust announced a 30 September 2025 distribution that would bring eligible Class 5A claims to 78% and Class 5B claims to 95% cumulatively; receipt depended on eligibility and processing",
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          "sourceId": "source-f5392f821f767554",
          "locator": "Trust’s announcement of planned 30 September 2025 distribution to eligible claims, cumulative class percentages, prerequisites and expected 1–3 business-day provider processing."
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      ],
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        "notes": [
          "Read SEC complaint, CFTC release, Ray testimony, DOJ charges/verdict/sentence and the recovery trust announcement. September 2025 payment percentages are scheduled conditional class distributions, not confirmation that every creditor was paid."
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      "id": "sec-complaint-2022",
      "label": "Complaint, Securities and Exchange Commission v. Samuel Bankman-Fried",
      "publisher": "US Securities and Exchange Commission",
      "issued": "2022-12-13",
      "url": "https://www.sec.gov/files/litigation/complaints/2022/comp-pr2022-219.pdf",
      "note": "The SEC’s complaint: FTX’s founding and structure, the diversion of customer deposits to Alameda, and a dated account of 2 to 11 November 2022 including the withdrawal pause, the Binance deal and the bankruptcy.",
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      "locator": "The SEC’s complaint: FTX’s founding and structure, the diversion of customer deposits to Alameda, and a dated account of 2 to 11 November 2022 including the withdrawal pause, the Binance deal and the bankruptcy.",
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      "label": "CFTC Charges Sam Bankman-Fried, FTX Trading and Alameda with Fraud and Material Misrepresentations",
      "publisher": "US Commodity Futures Trading Commission",
      "issued": "2022-12-13",
      "url": "https://www.cftc.gov/PressRoom/PressReleases/8638-22",
      "note": "Announces the CFTC complaint, the “allow negative flag,” the “safest and easiest” marketing claim, and customer losses of more than $8 billion.",
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    },
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      "id": "doj-charges-2022",
      "label": "United States Attorney Announces Charges Against FTX Founder Samuel Bankman-Fried",
      "publisher": "US Department of Justice, Southern District of New York",
      "issued": "2022-12-13",
      "url": "https://www.justice.gov/usao-sdny/pr/united-states-attorney-announces-charges-against-ftx-founder-samuel-bankman-fried",
      "note": "The unsealed eight-count indictment, the arrest in the Bahamas the previous day, and the US Attorney’s “intentional fraud” statement.",
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      "locator": "The unsealed eight-count indictment, the arrest in the Bahamas the previous day, and the US Attorney’s “intentional fraud” statement.",
      "recordId": "source-1d3f0751c8cca573",
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    },
    {
      "id": "doj-verdict-2023",
      "label": "Statement of U.S. Attorney Damian Williams on the Conviction of Samuel Bankman-Fried",
      "publisher": "US Department of Justice, Southern District of New York",
      "issued": "2023-11-02",
      "url": "https://www.justice.gov/usao-sdny/pr/statement-us-attorney-damian-williams-conviction-samuel-bankman-fried",
      "note": "Records the 2 November 2023 conviction and lists the seven counts with their maximum penalties.",
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      "label": "Samuel Bankman-Fried Sentenced to 25 Years in Prison",
      "publisher": "US Department of Justice, Southern District of New York",
      "issued": "2024-03-28",
      "url": "https://www.justice.gov/usao-sdny/pr/samuel-bankman-fried-sentenced-25-years-prison",
      "note": "The 25-year sentence, supervised release and forfeiture of over $11 billion, the $1.7 billion and $1.3 billion investor and lender figures, and the altered code allowing unlimited Alameda withdrawals.",
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      "locator": "The 25-year sentence, supervised release and forfeiture of over $11 billion, the $1.7 billion and $1.3 billion investor and lender figures, and the altered code allowing unlimited Alameda withdrawals.",
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      "id": "ray-testimony-2022",
      "label": "Testimony of Mr. John J. Ray III, CEO, FTX Debtors",
      "publisher": "US House Committee on Financial Services",
      "author": "John J. Ray III",
      "issued": "2022-12-13",
      "url": "https://democrats-financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-rayj-20221213.pdf",
      "note": "Ray’s sworn testimony: his appointment on 11 November, the Chapter 11 filings of over 100 entities, and his list of failed controls including commingling and unlimited Alameda borrowing.",
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    },
    {
      "id": "ftx-recovery-trust-2025",
      "label": "FTX Recovery Trust to Distribute Approximately $1.6 Billion to Creditors in Third Distribution on September 30, 2025",
      "publisher": "FTX Recovery Trust, via PR Newswire",
      "issued": "2025-09-19",
      "url": "https://www.prnewswire.com/news-releases/ftx-recovery-trust-to-distribute-approximately-1-6-billion-to-creditors-in-third-distribution-on-september-30--2025--302561856.html",
      "note": "Trust’s announcement of planned 30 September 2025 distribution to eligible claims, cumulative class percentages, prerequisites and expected 1–3 business-day provider processing.",
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      "locator": "Trust’s announcement of planned 30 September 2025 distribution to eligible claims, cumulative class percentages, prerequisites and expected 1–3 business-day provider processing.",
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      "version": null
    }
  ],
  "related": {
    "articles": [
      "bitcoin-wallets-explained",
      "private-keys-and-seed-phrases",
      "bitfinex-hack-2016",
      "bitcoin-ponzi-schemes-and-scams",
      "bitcoin-price-history"
    ],
    "dossiers": [
      "bitcoin-exchanges-history",
      "mt-gox-collapse",
      "institutional-bitcoin-adoption"
    ],
    "wallets": []
  },
  "revisionHistory": [
    {
      "date": "2026-09-23",
      "kind": "published",
      "summary": "Initial Bitcoin encyclopedia entry at this permanent URL."
    },
    {
      "date": "2026-10-02",
      "kind": "correction",
      "summary": "Revised direct answer to preserve source scope and qualifications. Corrected key fact: FTX operations Corrected key fact: Announced distribution Corrected scope or wording: According to the complaint the US Securities and Exchange Commission filed in Decembe Revised section: A distribution announcement is not proof of every customer’s recovery Corrected FAQ: Did FTX customers get their money back? Corrected FAQ: How long is Sam Bankman-Fried’s sentence?"
    },
    {
      "date": "2026-10-02",
      "kind": "publishing-format",
      "summary": "Added reusable claims, explicit source locators, and matching Markdown and JSON. This publishing change does not itself establish factual verification."
    }
  ],
  "citation": "Degrees of Satoshi editorial project. “The collapse of FTX: the run, the bankruptcy, and the 25-year sentence.” Published 2026-09-23; updated 2026-10-02. https://degreesofsatoshi.com/encyclopedia/ftx-collapse/"
}