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Exchange collapse·resolved

FTX Collapse — November 2022

The world's second-largest crypto exchange filed for Chapter 11 bankruptcy within nine days of a leaked Alameda balance sheet that revealed commingled customer funds.

FTX, founded by Sam Bankman-Fried in 2019, grew into the second-largest cryptocurrency exchange by volume by mid-2022. It collapsed in nine days after public disclosure that its sister firm Alameda Research held a balance sheet dominated by FTX's own FTT token rather than independent assets.

The mechanism of the collapse was straightforward: FTX customer deposits had been transferred to Alameda Research and used as trading capital, leaving FTX without the reserves to honour withdrawal requests once a bank run began.

The Chapter 11 process under court-appointed CEO John Ray III subsequently recovered substantially more assets than expected. As of the May 2024 reorganisation plan, FTX projected returning approximately 118% of the dollar value of customer claims as of the November 2022 petition date. This recovery reflects appreciation of recovered cryptocurrency holdings since the petition, not a return on the original asset positions.

SBF was convicted in November 2023 on counts including wire fraud, conspiracy to commit wire fraud, conspiracy to commit money laundering, and conspiracy to commit securities fraud. He received a 25-year federal sentence in March 2024.

Timeline

  1. CoinDesk publishes Alameda balance sheet leak

    Article reveals $14.6B in assets dominated by FTT, raising solvency questions about Alameda and its relationship to FTX.

    source →
  2. CZ announces Binance is divesting all FTT

    A tweet from Binance's Changpeng Zhao citing "recent revelations that have come to light" triggers a price collapse in FTT and a rush of withdrawals at FTX.

    source →
  3. FTX halts withdrawals

    After more than $6B leaves the exchange in 72 hours, FTX pauses non-fiat withdrawals.

  4. Binance signs non-binding LOI to acquire FTX

    Binance announces intent to acquire FTX subject to due diligence — a deal that lasts roughly 24 hours.

  5. Binance walks away from acquisition

    Citing "corporate due diligence" and "the latest news reports regarding mishandled customer funds and alleged US agency investigations", Binance abandons the deal.

  6. FTX, Alameda and 130 affiliates file for Chapter 11

    Sam Bankman-Fried resigns. John Ray III, the lawyer who oversaw the Enron liquidation, is appointed CEO.

  7. Unauthorised transactions drain ~$415M

    Outflows from FTX wallets occur after the Chapter 11 filing. Some are later attributed to compromised access; others to internal actors.

  8. SBF arrested in the Bahamas

    US prosecutors charge SBF with eight counts including wire fraud and conspiracy. The Bahamas detains him pending extradition.

  9. SBF convicted on all seven counts

    A Manhattan federal jury convicts SBF after a four-week trial featuring testimony from Caroline Ellison, Gary Wang and Nishad Singh.

  10. SBF sentenced to 25 years

    Judge Lewis Kaplan also orders $11B in forfeiture. SBF appeals on grounds of constructive denial of counsel; the conviction is upheld.

  11. Reorganisation plan: ~118% recovery on petition-date dollars

    FTX's reorganisation plan projects creditors will receive approximately 118% of the dollar value of their claims as measured on 11 November 2022.

  12. Plan confirmed by the court

    Bankruptcy court confirms the reorganisation plan, triggering distribution phase. Distributions begin in stages from early 2025.

  13. Bankman-Fried formally applies for a presidential pardon

    Sam Bankman-Fried formally applied for a presidential pardon more than two years after he was convicted over the multi-billion dollar collapse of FTX. The article does not report any change to the collapse’s recovery or repayment figures.

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Who was involved

Legal record

Sentence
25 years federal prison + $11B forfeiture
Custodian
John Ray III
Lead Court
Delaware Bankruptcy Court
Verdict Date
2023-11-02
Sentence Date
2024-03-28
Chapter 11 Filed
2022-11-11
Key Personnel Convicted
Sam Bankman-Fried, Caroline Ellison, Gary Wang, Nishad Singh

Structural failures identified

Related records

Sources

  1. FTX bankruptcy claims portal, Kroll Restructuring Administration — Authoritative source for claim numbers and distribution schedule
  2. SBF sentencing press release, US Department of Justice — Sentence and forfeiture amounts
  3. SEC charges Sam Bankman-Fried, US Securities and Exchange Commission — Charges narrative
  4. Divisions in Sam Bankman-Fried's crypto empire blur on his trading titan, Alameda's balance sheet, CoinDesk — The article that triggered the collapse