The token began to rise in value—a trend that only got stronger as the trading company used a portion of its transaction fees to buy back (“burn”) tokens.
FTX began to sell more and more FTT tokens. As their value increased, more people bought them.
This sounds great, but how does FTX benefit from this? The way it works is this: Alameda sells their FTT tokens back to FTX at a discount. FTX then uses those tokens to pay for their own operations (which are minimal) and then resells them on the market for profit.
But Alameda's ownership of FTT tokens was a big secret. No one knew how much they had, but everyone knew that the price for these assets began rising when people started using them to trade on exchanges.
So it seems Alameda bought FTT tokens at low prices. Waited for its value to explode, then used these highly inflated tokens as collateral in order to borrow “real money” from other companies—who on earth is offering loans that involve accepting a cryptocurrency as collateral?
No one knows the true source of funding for it, but some people believe that FTX contributed at least in part.