FTX was valued at $32B and considered the "safe" exchange. Sequoia backed it. SBF testified before Congress. FTX promised proper compliance and smart money backing. Millions of users trusted their coins to FTX.
A leaked balance sheet revealed Alameda (SBF's prop firm) held $5.8B in FTT as primary collateral. This was circular: FTX issued FTT, Alameda borrowed FTT, FTX lent Alameda against FTT. When CZ announced Binance would sell all FTT holdings, panic ensued. FTT crashed 80% in 24 hours. FTX then halted withdrawals, revealing an $8B hole in customer deposits. Investigation showed SBF secretly lent customer deposits to Alameda for risky bets.
Not your keys, not your coins. Never trust a centralized custodian. Proof of reserves means nothing if the exchange controls the auditor. Learn how to <a href="https://www.web3farmyard.com/blog/step-by-step-beginner-guide-how-to-create-secure-your-first-crypto-wallet/">create and secure your own wallet</a> to avoid this.