FTX’s Collapse Was a Crime, Not an Accident

FTX, like other crypto platforms and some conventional equity or commodity services, offered users “margin,” or loans, that they could use to make trades. However, these loans are generally collateralized – that is, users put up other funds or assets to back their borrowing. If the value of that collateral drops, or a margin trade loses enough money, the user’s collateral will be sold and the exchange will use that money to pay off the initial loan.