FTX turned from a $32 billion crypto industry darling into a spectacular fraud, becoming one of the most devastating business collapses witnessed in recent years. The collapse exposed an $8 billion hole in FTX’s accounts, triggered by a spike in customer withdrawals that the exchange couldn’t meet. What looked like a revolutionary cryptocurrency platform was actually a house of cards built on lies, deception, and misappropriated customer funds that vanished seemingly overnight.
FTX: The Eight Billion Dollar Crypto Catastrophe
In eleven months, FTX went from being valued at $32 billion in January 2022 to filing for bankruptcy in November, wiping out billions in investor money. When the house of cards collapsed, the exchange owed as much as $8 billion according to sources cited by major outlets. Federal regulators at the CFTC say that just a month after founding FTX.com, Sam Bankman-Fried was leveraging customer assets for Alameda’s own bets, unbeknownst to all but a small circle of insiders. A federal judge sentenced Bankman-Fried to 25 years in prison for defrauding investors out of billions.
WeWork: From Forty-Seven Billion to Bankruptcy Court
WeWork filed for Chapter 11 bankruptcy protection, listing over $18.6 billion of debt after once being valued at $47 billion at its peak. The company raised over twenty-two billion dollars and had assets of over fifteen billion when it filed in federal court. Valued in 2019 at $47 billion in a round led by SoftBank, the company tried and failed to go public five years ago. The SoftBank-backed venture was worth $45 million before its bankruptcy filing, representing a staggering loss of value. Adam Neumann’s charismatic vision of revolutionizing office culture couldn’t save the fundamentally flawed business model underneath all the hype.
Theranos: The Blood-Testing Fraud That Cost Hundreds of Millions
Founded in 2003 by then 19-year-old Elizabeth Holmes, Theranos raised more than $700 million from venture capitalists, resulting in a $9 billion valuation at its peak. The Ninth Circuit affirmed fraud convictions and a $452 million restitution order for Theranos investors, meaning Elizabeth Holmes and her former business partner are heading to prison. Former employees testified that the Edison device kept failing quality control checks, with only 12 out of 300 tests ever running on the Edison. The technology Holmes promised would revolutionize healthcare simply didn’t work, yet she continued raising money from sophisticated investors who should have known better.
Silicon Valley Bank: A Spring 2023 Banking Catastrophe
In Spring 2023, the U.S. banking system cracked with the failures of Signature Bank, SVB Financial Group, and First Republic Bank. Those failures mainly occurred due to asset-liability duration mismatches, a fundamental banking error that sent shockwaves through the financial system. The collapse of these institutions required federal intervention and shook confidence in regional banks across the country. It’s hard to say for sure, but many analysts believe the ripple effects will be felt for years to come as regulators tighten oversight on similar institutions.
Corporate Bankruptcies Surge to Historic Levels
US corporate bankruptcy filings hit a 14-year high in 2024 as filings continued at a steady clip, with December’s 61 bankruptcy filings bringing the 2024 total to 694, surpassing both 2023 and pandemic-era levels. 694 companies filed for bankruptcy protection in 2024, making it the most active year since 2010, when companies were still dealing with the aftermath of the financial crisis. Businesses continued to face pressure from elevated interest rates, especially as total debt among credit-rated nonfinancial US companies reached a quarterly record of $8.453 trillion. The wave of failures swept through retail, healthcare, and industrial sectors with brutal efficiency.
Spirit Airlines and the Travel Industry Collapse
The budget airline filed for Chapter 11 bankruptcy protection in November, facing over $1 billion in looming debt payments and accumulating more than $2.5 billion in losses since 2020. The yellow-hued budget carrier landed in bankruptcy in November because of mounting losses, unaffordable debt, increased competition and the inability to merge with other airlines. In March, JetBlue and Spirit Airlines ended their proposed $3.8 billion merger after a court ruling blocked the deal, leaving Spirit without a viable path forward. The collapse shows how quickly a major airline can fall when debt catches up with declining revenues.
