It was perhaps the best ad of the 2022 Superbowl cycle; the one where Larry David characters questioned new, ultimately world-changing innovations from the wheel to the smartphone to crypto. But when it came to FTX, the sponsor of the ad, Larry David, was right.
FTX was once the high-flying superstar of the crypto world, one that promised to make holding and exchanging crypto currencies easy and safe. It was endorsed by superstars like Tom Brady and Steph Curry. It put its name on sports arenas and spread major political contributions across both parties.
But earlier this month FTX folded like a house of cards and its founder and CEO, Sam Bankman-Fried, was arrested in the Bahamas and charged with civil and criminal violations by the Department of Justice and the SEC.
So, is the FTX story one that is uniquely related to crypto or is it simply a tale of old-fashioned embezzlement? How did the relationship between FTX and its sister company, Alhambra, lead to this collapse? How did a company handling billions of dollars operate with what has been labeled an unprecedented lack of record-keeping? And are there regulatory structures for US stock brokerage accounts that guard against a similar misuse of customer funds?
Erich Schwartz, a former SEC enforcement attorney and current professor at the University of Texas, helps explain break down what happened.