FTX, once valued at $32 billion and celebrated as the respectable face of crypto, filed for Chapter 11 bankruptcy. The exchange, its affiliated trading firm Alameda Research, and roughly 130 related entities collapsed within a week, and founder Sam Bankman-Fried resigned as chief executive.

The unraveling began with reporting on Alameda's balance sheet, which showed it was heavily dependent on FTT, a token FTX had itself created. When rival exchange Binance announced it would sell its FTT holdings, customers rushed to withdraw. FTX could not meet redemptions — because, prosecutors later alleged, customer deposits had been diverted to Alameda.

The blast radius was enormous. Blue-chip venture firms including Sequoia Capital and Paradigm wrote their FTX stakes to zero, and the contagion froze crypto lending across the industry. Bankman-Fried was later convicted on multiple counts of fraud and conspiracy.

For venture capital, FTX became the cycle's cautionary tale about diligence: a reminder that brand-name co-investors and a charismatic founder are not a substitute for looking at the books.