Mark ở vũ trụ khácVIMark học AI
Mark ở vũ trụ khác · Another Universe Anatomy of a Business Failure #10 · Finance · Crypto

FTX

FTX Trading Ltd. and Alameda Research · collapse November 2022 · The Bahamas

Whata crypto exchange went bankrupt in about 9 days
Damage$8.7 billion of customer assets misused
Root causeone group held customer money, kept the books and wrote the rules
Main sourcesJohn J. Ray III's declaration, SEC and CFTC complaints, SDNY court record

Source: about 9 days counts from the CoinDesk story of 2 Nov 2022 (secondary source) to the Chapter 11 filing of 11 Nov 2022; $8.7 billion: Second Interim Report of John J. Ray III (26 Jun 2023).

Re-read in 1 minute

Essence

Customer cash sat in another firmCustomer deposits went into bank accounts of Alameda, a fund with the same owners.
Books kept by handAlameda staff credited FTX's ledger manually. Customers saw a balance; the money was elsewhere.
One privileged accountAlameda could go negative, had a near-unlimited line of credit, and was spared auto-liquidation.
Spending approved by emojiPayment requests went through chat; approvers replied with emojis.
Not "just a crypto crash"The price crash only exposed the hole. A jury convicted for fraud.

Source: CFTC complaint (Dec 2022) on Alameda bank accounts and manual credits; SEC complaint (13 Dec 2022) on the line of credit, negative balance and liquidation exemption; John J. Ray III declaration (17 Nov 2022) on emojis; DOJ, US v. Bankman-Fried judgment (2023–2024).

Part 1

The question of the case

An exchange that raised more than $1.8 billion from investors, why did it collapse in a few days? Not because crypto prices fell, but because customer money was not where customers thought it was, and nobody independent was in a position to notice.

Source: SEC press release 2022-219 (more than $1.8 billion from equity investors, since May 2019).

2019–2022Two firms, one set of ownersFTX took customer money. Alameda held cash and enjoyed privileges on the exchange.
→
2–9 Nov 2022Leak, then a runAlameda's balance sheet leaked. Customers rushed to withdraw. The money was not there.
→
11 Nov 2022BankruptcyChapter 11 filing. The man who cleaned up Enron stepped in.
Part 2

What happened

Up for three years, down in about nine days. Dates come from court and regulator records; the November 2022 dates before the filing are secondary sources.

The climb from 2019 to 2022: FTX raised money from May 2019, more than 1.8 billion dollars in total. From late 2019 Alameda's account was allowed to go negative. Then a straight drop in November 2022: on the 2nd a story about Alameda's balance sheet, on the 6th Binance said it would sell FTT, on the 8th a rush of withdrawals, on the 9th Binance walked away, on the 11th the bankruptcy filing. May 2019fundraising starts late 2019Alameda may go "negative" peak: over $1.8 billion in equitytotal raised from investors 2 Nov 6 Nov 8–9 Nov 11 Nov illustrative timescale, not to scale
Three years up, nine days down. Alameda's privileges dated from late 2019, long before anyone outside knew.Source: SEC press release 2022-219 (raising from May 2019, over $1.8 billion); CFTC amended complaint of 21 Dec 2022 (allow-negative flag); Gary Wang's trial testimony, Oct 2023 (from late 2019; secondary source: Blockworks, Decrypt); 2–9 Nov 2022 dates from Blockworks' timeline (secondary source).
From May 2019 · FundraisingMore than $1.8 billion from equity investors, about $1.1 billion from about 90 U.S. investors. They bought believing FTX had proper risk controls.
2019–2022 · Two firms, one ledgerCustomer fiat went into Alameda's bank accounts. Alameda staff credited FTX's internal ledger by hand.
2 Nov 2022 · The leakCoinDesk published Alameda's leaked balance sheet, heavy in FTT, a token issued by FTX itself (secondary source).
6–9 Nov 2022 · The runBinance said it would sell FTT, signed a letter of intent to buy FTX, then walked away after looking at the books (secondary source).
11 Nov 2022 · Chapter 11FTX and Alameda filed in Delaware. Bankman-Fried resigned. John J. Ray III became CEO.
17 Nov 2022 · Ray's declaration"Never in my career have I seen such a complete failure of corporate controls."
13 Dec 2022 · Three cases in one dayThe SEC and CFTC sued; the criminal indictment was unsealed in New York.
2 Nov 2023 and 28 Mar 2024 · SDNYA jury convicted on 7 counts. Sentence: 25 years in prison, $11 billion forfeiture.
Oct 2024 · Repayment planThe bankruptcy court confirmed it: 98% of creditors get about 119% of allowed claims, valued at filing-date prices.
12 Jun 2026 · AppealThe Second Circuit unanimously affirmed the conviction and sentence.

Source: SEC press release 2022-219; CFTC complaints (13 and 21 Dec 2022); Ray declaration (17 Nov 2022, via CNBC); DOJ sentencing release (28 Mar 2024); Chapter 11 plan confirmed Oct 2024 (via Finance Magnates, secondary source); US v. Bankman-Fried, No. 24-961 (2d Cir., 12 Jun 2026).

Part 1

What happened

$1.8bn raised9 daysChapter 11$8.7bn
Part 2

Why

who holds the moneywho keeps the booksprivileged accountmyths
Part 3

Work lesson

separation of dutiesindependent reconcilerclosing the 10-company series
Part 3

Why: four layers of cause

Structure: the money holder kept the books

no segregation of dutiesCFTC, Dec 2022
A customer deposits fiat. The money goes into Alameda's bank account, not FTX's. Alameda staff manually credit the same amount on FTX's internal ledger. The customer sees a balance on FTX, but the real money is at Alameda. No independent person reconciles the two. customerdeposits fiat Alameda bank accountthe real money is here(a fund with the same owners) FTX internal ledgercustomer sees a balance herecredited by hand Alameda staffwrite into FTX's books independentchecker: none
A balance on a screen is not money in a safe. When the person who holds the money also keeps the books, the books are right only when that person wants them to be.Source: CFTC complaint (13 Dec 2022, amended 21 Dec 2022): customer deposits went to Alameda-controlled bank accounts, Alameda staff manually credited FTX's ledger.

Code: one account above the common rules

allow negative · no auto-liquidationSEC, CFTC
A normal account versus Alameda's account on FTX. Normal account: no negative balance, a credit limit, automatic liquidation on losses. Alameda's account: negative balance allowed, a virtually unlimited line of credit, exempt from automatic liquidation. These privileges were not disclosed. normal account Alameda's account negative balancenot allowedallowed credit linelimited"virtually unlimited" auto-liquidationyesexempt disclosed to userscommon rulesno
The rules were written in code, and so was the exception. A flag in the code let Alameda borrow customer money without anyone outside a small group knowing. At trial, co-founder Gary Wang testified that this line reached $65 billion.Source: SEC complaint (13 Dec 2022): "virtually unlimited" line of credit, negative balance, liquidation exemption; CFTC amended complaint (21 Dec 2022): "allow negative flag", not disclosed; $65 billion: Gary Wang's testimony, 6 Oct 2023 (secondary source: Blockworks, Decrypt).

Organisation: no trustworthy books

no controlsRay, 17 Nov 2022 and 9 Apr 2023

Spending approved by emoji

Payment requests went through a chat platform; a disparate group of supervisors approved them with personalised emojis (Ray declaration, 17 Nov 2022).

No idea how much cash

No centralised control of cash, no accurate list of bank accounts and signatories (Ray declaration).

Company money, personal names

Corporate funds bought homes in the Bahamas; some property was recorded in the names of employees and advisers (Ray declaration, via CNBC).
Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.John J. Ray III, declaration to the Delaware bankruptcy court, 17 Nov 2022. Ray had led Enron after its bankruptcy.

Further source: Ray told the U.S. House on 13 Dec 2022 that FTX used QuickBooks and passed invoices around by chat (secondary source: Fortune); the First Interim Report (9 Apr 2023) found missing controls in four areas: governance, finance and accounting, digital asset management, cybersecurity.

Motive: trust in place of checking

trust as a substitute for verificationSEC; Ray, 26 Jun 2023
The collapse chain: bad news about Alameda makes customers withdraw. An exchange holding all customer money could pay. FTX could not, because 8.7 billion dollars of customer assets had been misused, more than 6.4 billion of it fiat and stablecoins. bad news leaksFTT price plunges → customers rush outas with any bank → the safe is part-emptycannot pay FTX.com customer assets misused$8.7 billion of which fiat and stablecoinsover $6.4 billion
The run was the fuse, not the explosive. Investors put money in because they believed controls existed, so nobody outside asked "where is customer money right now?"Source: Ray's Second Interim Report (26 Jun 2023): $8.7 billion, over $6.4 billion fiat and stablecoins (via The Block, secondary source); SEC complaint (investors believed FTX had proper risk controls).
Part 4

Fact check: what is true and what is myth

12 things often said about FTX, checked against bankruptcy filings, complaints and the judgment. Tap a row to see why.

Three figures for lost customer money. CFTC, December 2022: more than 8 billion dollars of customer deposits. Ray's report, June 2023: 8.7 billion dollars of FTX.com customer assets misused. Judge Kaplan at sentencing, March 2024: customers lost about 8 billion dollars. Dec 2022 · CFTCover 8bn Jun 2023 · Ray's report8.7bn Mar 2024 · the judge~8bn
Three numbers, one hole. They differ by date and scope. This piece uses the estate's $8.7 billion when it speaks of misused customer assets.Source: CFTC press release 8644-22 and complaint; Ray's Second Interim Report (26 Jun 2023, via The Block, secondary source); Judge Kaplan at sentencing, 28 Mar 2024 (secondary source).
SOLIDPayments were approved by emoji

Ray declaration (17 Nov 2022): payment requests went through a chat platform and "a disparate group of supervisors" approved them with personalised emojis. The Third Circuit (2024) quotes this passage.

SOLIDFTX ran its money on QuickBooks

Ray told the U.S. House on 13 Dec 2022 (Fortune, secondary source for the wording). The problem was not the software but the absence of an accounting process around it.

SOLIDAlameda had a near-unlimited credit line on FTX

The SEC and CFTC both say "virtually unlimited". Gary Wang testified to $65 billion at trial (secondary source). Accounts of the starting limit differ, so this piece does not use one.

SOLID"The man who cleaned up Enron said he had never seen worse"

True in substance: Ray wrote "never in my career", and he led Enron after its bankruptcy. But "worse than Enron" is a headline, not his wording.

SOLIDBankman-Fried got 25 years and lost his appeal

Convicted on 7 counts (2 Nov 2023); 25 years and $11 billion forfeiture (28 Mar 2024). The Second Circuit affirmed unanimously on 12 Jun 2026, calling the evidence "robust".

CAUTION"Customers got over 100%, so nobody lost"

The plan pays about 119% to 98% of creditors, but claims are in dollars at 11 Nov 2022 prices, not later crypto prices. Many creditors objected to that, and they waited more than two years (secondary source: The Block, NBC). An early-2024 estimate was 118%.

CAUTION"Bankman-Fried acted alone and nobody knew"

The court found him the one who directed it. But the CFTC also sued Caroline Ellison and Gary Wang; they pleaded guilty and testified at trial. Wang said he wrote the code on request.

Source: CFTC amended complaint, 21 Dec 2022; US Attorney's Office SDNY press release, 21 Dec 2022, on the guilty pleas of Ellison and Wang; Wang's trial testimony (secondary source: press coverage of the October 2023 trial).

CAUTION"Binance deliberately killed FTX"

Binance's public sale of FTT lit the run (secondary source). But an exchange holding all customer money can pay a run. Binance's motive was not what the court examined in this case.

FALSE"It was just a crypto crash"

Customer money went into Alameda accounts and was used for Alameda (CFTC); $8.7 billion of customer assets was misused (Ray's report, Jun 2023). The jury convicted for fraud, not for "losing on trades".

FALSE"FTX lost the money in a hack"

There was a real unauthorised drain, but on the night of 11–12 Nov 2022, after the bankruptcy filing. Estimates of the amount conflict (secondary source: Elliptic, Halborn). The hole in customer assets came first.

FALSE"Customers lost everything"

The plan confirmed in Oct 2024: 98% of creditors receive about 119% of allowed claims; distributable assets estimated at $14.7 to $16.5 billion (secondary source). See the Caution row above on how it is valued.

FALSE"Big-name investors checked it, so FTX had to be fine"

SEC: investors bought shares believing FTX had proper risk controls, while Alameda's privileges were hidden. A famous investor's name does not replace the question "who holds the money".

Source: Ray declaration (17 Nov 2022); SEC and CFTC complaints (Dec 2022); DOJ release (28 Mar 2024); US v. Bankman-Fried, No. 24-961 (2d Cir. 12 Jun 2026); Ray's Second Interim Report (Jun 2023); Chapter 11 plan (Oct 2024); Gary Wang's testimony (Oct 2023). Items marked "secondary source" come from press reporting.

Part 5

Verdict on the case

Scores are Mark's assessment based on the sources in Part 9, not data from a study.

Avoidable
5/5
Warning signs existed
3/5
Transparent investigation
5/5
Customers made whole
4/5
Done right after the collapse
  • Outsiders took over at once and published the gaps
  • Recovered enough to pay allowed claims
  • A public trial, with an appeal
Not done right
  • Privileges from 2019 that nobody outside could see
  • Investors funded it without asking who held the money
  • Customers repaid at filing-date prices, after two years

The market did not kill FTX. One group held the money, kept the books and wrote the rules, and nobody stood in between to ask again.

More: why this looks more like an old bank failure than a tech story

Take out the word "crypto" and what remains is a very old story: customer deposits lent to a related party without matching collateral, exposed only when customers come for their money at once.

Ray himself wrote that the root causes were familiar: "hubris, incompetence, and greed". What was new was the speed, and that every privilege sat in a few lines of code only a small group could read.

Source for "More": Ray's First Interim Report (9 Apr 2023), the phrase "hubris, incompetence, and greed"; the rest is Mark's commentary.

Part 6

Work lesson: separate the duties

No one both holds the money and keeps the books. Applies to a team fund, an ad budget, inventory, admin rights, even shared passwords.

Three roles must be three different people: the custodian of the asset, the bookkeeper, the approver who sets the rules. A fourth, independent person reconciles the books against the real asset on a schedule. Every exception must be written down and visible to the reconciler. 1 · custodiancash, stock, access 2 · bookkeeperrecords every change 3 · approversets and signs the rules 4 · independent reconcilerbooks vs real assets, on a schedule
At FTX the first three roles sat in one group, and the fourth did not exist. Alameda held customer money, Alameda staff wrote into FTX's books, and Alameda's exception was written straight into the code.Source: the failures come from the CFTC and SEC complaints (Dec 2022); the four-role model is Mark's proposal.
Two people for every sum of moneyWhoever spends does not record. Whoever records does not hold the card or the bank password.
Reconcile against the real thingEach month, compare the books with the bank statement or the actual stock. The reconciler is not in the spending group.
Exceptions must be visibleEvery "special account" or over-limit right goes on a list the reconciler can read.
Approvals leave a trailAn emoji in a chat is not an approval. An approval has a person, an amount, a reason and a date.
Check your own team: 3 questions, 10 minutes

1. List the 3 most important things your team manages: a fund, an ad budget, stock, admin accounts.

2. For each, write names: who holds it, who records it, who reconciles it. If two boxes share a name, that is where to separate.

3. Ask: is there an exception only one person knows about? If so, write it down and hand it to the reconciler.

Part 7 · Closing the series

10 companies: did failure come from the market or from inside?

Markets change; that is normal. What decides the outcome is whether people inside see it, say it and act in time.

Kodak · #1The market moved to digital; the cash-cow film business judged the new idea.
Blockbuster · #6The market moved online; short-term metrics beat the long-term project.
Nokia · #3Smartphones changed the game; bad news could not travel upward.
Quibi · #7The product did not fit a need; COVID was only part of the story.
Lehman · #8An outside housing crisis met inside leverage and "dressed-up" numbers.
WeWork · #9A great story whose unit economics could not survive a turn in the market.
New Coke · #4Measured what was easy, not what customers needed; fixed in time, so no collapse.
Theranos · #2The technology did not work, and nobody was allowed to say "it doesn't work yet".
Enron · #5Nobody could explain where the money came from.
FTX · #10Customer money was not where customers thought; nobody separated holding from recording.
An axis from "the market changed" on the left to "broken inside" on the right. Kodak and Blockbuster sit near the left; Nokia, Quibi, Lehman and WeWork in the middle; New Coke, Theranos, Enron and FTX on the right. In all ten companies, the inside response decided the outcome. the market changedbroken inside KodakBlockbuster NokiaQuibiLehmanWeWork New CokeTheranosEnronFTX In all 10 companies, how the inside responded decided the ending.
No company died of the market alone. Kodak and Blockbuster faced real change, but inside decisions made them slow. FTX sits at the other end: the market was only the fuse.Positions on the axis are Mark's assessment, based on each piece's lesson in the series; no new figures.
Part 8

Read next

John J. Ray III's declaration (17 Nov 2022)Reads like a list of what no company should lack. The cash-control section is the core.
Ray's First and Second Interim Reports (2023)The first on control failures; the second on commingling and misuse of customer money.
The CFTC complaint (amended 21 Dec 2022)The clearest description of how customer money reached Alameda's accounts.
Anatomy of a Business Failure #05: Enron (2001)Same clean-up man, same question: where does the money come from, and who checks?
The whole 10-company series at markhocai.com/vu-tru-khacRe-read from Kodak to FTX, sorted by work lesson.
Part 9

Primary sources

Court records, regulators and the bankruptcy estate first. Press reporting is marked as a secondary source. Note: while writing, the original sites could not be reached directly, so filings were checked through quotations in official releases and the press; check against the original text before publishing.

  1. John J. Ray III, Declaration in Support of Chapter 11 Petitions and First Day Pleadings, In re FTX Trading Ltd., Case No. 22-11068 (JTD), Bankr. D. Del., 17 Nov 2022. restructuring.ra.kroll.com/FTX; quoted in In re FTX Trading Ltd. (3d Cir. 2024). findlaw
  2. SEC, SEC v. Samuel Bankman-Fried (SDNY), complaint 13 Dec 2022; press release 2022-219. sec.gov
  3. CFTC, CFTC v. Bankman-Fried, FTX Trading Ltd. and Alameda Research, complaint 13 Dec 2022, amended 21 Dec 2022; press release 8644-22. cftc.gov · amended complaint
  4. DOJ, United States v. Samuel Bankman-Fried, S1 22 Cr. 673 (LAK), SDNY: sentencing release, 28 Mar 2024. justice.gov
  5. Second Circuit, United States v. Bankman-Fried, No. 24-961, 12 Jun 2026. ca2.uscourts.gov
  6. John J. Ray III, First Interim Report to the Independent Directors on Control Failures at the FTX Exchanges, 9 Apr 2023, D.I. 1242-1. courtlistener
  7. John J. Ray III, Second Interim Report (commingling and misuse of customer deposits at FTX.com), 26 Jun 2023; read via The Block (secondary source). theblock.co
  8. Chapter 11 plan confirmed Oct 2024, effective 3 Jan 2025; read via Finance Magnates (secondary source). financemagnates.com
  9. Secondary sources: Fortune, 13 Dec 2022 (Ray's testimony, QuickBooks); CNBC, 17 Nov 2022 (Ray declaration); Blockworks and Decrypt, Oct 2023 (Gary Wang's testimony); Blockworks timeline of 2–11 Nov 2022; The Block, Mar 2025 (filing-date prices); Elliptic and Halborn (the Nov 2022 unauthorised drain).