The Night FTX Vanished

Empire Decisions · The Bahamas, 2022 · Sam Bankman-Fried
TL;DR: On November 2, 2022 a leaked balance sheet showed FTX's sister fund was built on FTX's own token. Nine days later the exchange, its $32 billion valuation, and roughly $8 billion of customer money were gone.
The Night FTX Vanished

What actually happened

The CoinDesk story revealed Alameda Research's assets were dominated by FTT, the token FTX itself issued. When rival exchange Binance announced it would dump its FTT holdings, the token's price collapsed, and with it the collateral propping up loans that had quietly been funded with customer deposits.

A run followed; withdrawals froze; a rescue acquisition by Binance died in a day of due diligence. FTX filed for bankruptcy on November 11. Bankman-Fried was convicted on seven fraud counts a year later. The industry's most trusted exchange had been prestige all the way down: congressional testimony, stadium naming rights, celebrity endorsements.

The customer money largely resurfaced through the bankruptcy estate's asset sales, but the exchange's legend didn't survive: the trust was the product, and it never trades again.

The play to remember

Prestige laundering: when the audit is replaced by endorsements, the balance sheet is whatever the leak says it is.

Sources & fact flags: CoinDesk (Nov 2022); US v. Bankman-Fried trial record; FTX bankruptcy filings.

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