David Z. Morris, writing for CoinDesk, with the best “all you need to know” overview of the FTX scandal I’ve seen:
Perhaps most perniciously, many outlets have described what
happened to FTX as a “bank run” or a “run on deposits,” while
Bankman-Fried has repeatedly insisted the company was simply
overleveraged and disorganized. Both of these attempts to frame
the fallout obfuscate the core issue: the misuse of customer
Banks can be hit by “bank runs” because they are explicitly in the
business of lending customer funds out to generate returns. They
can experience a short-term cash crunch if everyone withdraws at
the same time, without there being any long-term problem.
But FTX and other crypto exchanges are not banks. They do not (or
should not) do bank-style lending, so even a very acute surge of
withdrawals should not create a liquidity strain. FTX had
specifically promised customers it would never lend out or
otherwise use the crypto they entrusted to the exchange.
In reality, the funds were sent to the intimately linked trading
firm Alameda Research, where they were, it seems, simply gambled
away. This is, in the simplest terms, theft at a nearly
unprecedented scale. While the total losses have yet to be
quantified, up to one million customers could be impacted,
according to a bankruptcy document.
So in a sense FTX’s implosion had nothing to do with cryptocurrency directly, beyond the fact that no one would have given FTX a nickel if not for the vague belief that “something something crypto” would lead to a windfall. FTX took people’s money, told them they’d hold the money, but instead gambled that money away — on cryptocurrency.