A complete guide to the FTX & Alameda Affair
With the crisis surrounding Alameda, FTX, and its underlying token, FTT unfolding, one of the world's largest crypto exchanges is insolvent.
With the crisis surrounding Alameda, FTX, and its underlying token, FTT unfolding, one of the world's largest crypto exchanges is insolvent.
Over the past three years, FTX and Sam Bankman-Fried had a strong presence in crypto before self-immolating. Recently, Bankman-Fried has gained global attention for his views on cryptocurrency regulation and financial support for US electoral candidates:
@scupytrooples 100% advocating for crypto and defi
it would be dumb, otherwise, for me to support a bill that regulated *my* business--increasing costs/etc.--while respecting DeFi (which is what I think/hope Stabenow-Boozman will do!).
I'd love to hear your concrete proposals/disagreements!
— SBF (@SBF_FTX)
Oct 21, 2022
What happened? And why did almost nobody see it coming, and what might we expect next?
The downfall of a "crypto golden boy"
Every time SBF was mentioned, he was regarded as one of the most influential figures in the crypto world. According to the Bloomberg Billionaires Index, his net worth reached $16 billion earlier this week.
He was at his career peak when the FTX exchange went live in May 2019. It was marketed as a centralized exchange developed by traders for traders, backed by prominent investors, including Alameda Research, OTPP, Temasek, BlackRock, Coinbase Ventures, and Sequoia Capital. The exchange became a substantial player in the crypto markets. With a spot market trading volume of $89 billion in May 2022, it surpassed Coinbase and OKX.
At the time of writing on November 10th, FTX was ranked as the 40th largest spot and derivatives exchange by CoinMarketCap. Just the day before, on November 9th, it was in the fourth.

You probably remember that Bankman-Fried was described as the crypto John Pierpont Morgan (referring to the founder of JP Morgan who was ironically a robber baron) after supporting struggling companies like the lender BlockFi. Morgan used his funds to help emerging financial markets through crises twice around the turn of the nineteenth century, in 1893 and 1907. (See The Economist article titled: Crypto’s last man standing, Is Sam Bankman-Fried the John Pierpont Morgan of crypto?)
The crash
Everything fell apart for Bankman-Fried this week.
Many on-chain sleuths called the financial status of Alameda Research into question when it was discovered to be using FTX's FTT token as collateral (sidenote: Alameda Research is a quant trading firm founded by SBF in 2017…conflict of interest).
Let's start at the beginning when cracks in the foundation became apparent. People began to wonder after Alameda CEO Sam Trabucco suddenly stepped down. About a month later, FTX President Brett Harrison resigned as well. As you might expect, these resignations came just as it was revealed that FTX was facing legal trouble in the form of a securities regulator investigation.
Alameda CEO Sam Trabucco tweeted about the resignation:
It's with the same goal that I'm announcing today that I am stepping down as co-CEO of Alameda Research -- @carolinecapital will continue on as Alameda's CEO. I will stay on as an advisor, but otherwise will not continue to have a strong day-to-day presence at the company.
— Sam Trabucco (@AlamedaTrabucco)
Aug 24, 2022
FTX President Brett Harrison tweeted about the resignation:
1/ An announcement: I’m stepping down as President of @FTX_Official. Over the next few months I’ll be transferring my responsibilities and moving into an advisory role at the company.
— Brett Harrison (@BrettHarrison88)
Sep 27, 2022
Suspicions grew on November 2nd when Alameda's balance sheet was leaked. CoinDesk reporter Ian Allison published that roughly $5.8 billion of Alameda Research's balance sheet assets are linked to FTX's exchange token, FTT.
Due to the close relationship between Alameda and FTX, this discovery based on leaked internal documents was explosive. FTX created the FTT token out of thin air, raising concerns about the real-world, open-market value of FTT tokens held in reserve by affiliated entities.
Allegations of FTX insolvency
That's when more rumors began circulating, and the FUD machine went into overdrive. Allegations of FTX insolvency began to circulate.
Concerns about Alameda's balance sheet have resulted in mass withdrawals from FTX. According to internal messages obtained by Reuters, the exchange saw $6 billion in withdrawals in the 72 hours before things came to a head on the morning of November 8th.
According to Coinglass data, this temporarily left FTX with a balance of, believe it or not, one bitcoin. This has now recovered to 36 BTC, compared to over 500,000 BTC held by Coinbase and Binance.
This rush to the exits reportedly prompted SBF and his team to look for an acquisition partner, approaching various potential partners before Binance entered the picture.
Considering all of this we've been through in this article, it's interesting to note that one possible explanation is presented by Coinmetrics analyst Lucas Nuzzi, who claims to have evidence that FTX transferred funds to Alameda in September, possibly as a loan to cover Alameda's losses.
1/ I found evidence that FTX might have provided a massive bailout for Alameda in Q2 which now came back to haunt them.
40 days ago, 173 million FTT tokens worth over 4B USD became active on-chain.
A rabbit hole appeared 🧵👇
— Lucas Nuzzi (@LucasNuzzi)
Nov 8, 2022
What do you think about this possibility?
A new war between the giants FTX & Binance?
The role of Changpeng "CZ" Zhao, founder and CEO of Binance (the world's largest centralized crypto exchange), is probably the most intriguing aspect of the current debacle.
CZ and SBF have worked together occasionally, but recent interactions indicate rising interpersonal and business tensions.
Changpeng Zhao first revealed that his crypto exchange decided to sell its holdings of FTT. A migration of customers withdrawing their crypto from FTX followed, which saw the exchange run into liquidity troubles:
Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby against other industry players behind their backs. Onwards.
— CZ 🔶 Binance (@cz_binance)
Nov 6, 2022
The comparison to Luna is especially venomous, given that Luna creator Do Kwon is currently an international fugitive fleeing South Korean charges of financial fraud. Zhao's reference to lobbying efforts also gives the impression that something personal is at work here.
Zhao may have been offended by a since-deleted tweet by Bankman-Fried that appeared to cast doubt on Zhao's Chinese ancestry. Zhao is a Canadian who has long resisted claims that Binance is a Chinese company.
What shocked the crypto community was that Alameda Research CEO Caroline Ellison quickly and publicly offered Zhao an over-the-counter deal to buy the tokens for $22 each:
@cz_binance if you're looking to minimize the market impact on your FTT sales, Alameda will happily buy it all from you today at $22!
— Caroline (@carolinecapital)
Nov 6, 2022
That's puzzling because the public offer appeared to expose Alameda's concern about the market impact of Binance's sale. Ellison's offer was slightly lower than FTT's public exchange price at the time.
Binance later announced on November 8th that it was acquiring the FTX exchange as it planned to solve its liquidity crisis:
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ 🔶 Binance (@cz_binance)
Nov 8, 2022
In response, Bankman-Fried tweeted:
4) A *huge* thank you to CZ, Binance, and all of our supporters. This is a user-centric development that benefits the entire industry. CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.
— SBF (@SBF_FTX)
Nov 8, 2022
Meanwhile, key details, like FTX’s planned takeover of the bankrupt lender Voyager Digital and its investment in Solana, are now up in the air, prompting further concerns among the crypto industry.
Then came more CoinDesk reporting the following day, which has since been confirmed by other outlets, that Binance would likely pull out of the deal after a preliminary review of FTX's finances. It may be some time before we fully comprehend what Zhao saw when he peered behind the curtain, but it was probably nothing good.
The craziest 48 hours in crypto history
According to the latest information, TRX momentarily surged 4,000% on FTX after Justin Sun emerged as the latest FTX Savior.
Earlier in the day, Sun offered a "way forward" for FTX after another tweet from the day before:
The #FTX liquidity crisis has caused great concerns in our industry. My team and I are heavy-hearted to see how this crisis progresses. We will do everything we can to protect our users, including exchange all #TRX, #BTT, #JST, #SUN, #HT on the FTX platform at a 1:1 ratio. twitter.com/WuBlockchain/s…
— H.E. Justin Sun🇬🇩🇩🇲🔥₮ (@justinsuntron)
Nov 9, 2022
Sun's strategy is to attract and respect Tron-based assets such as $BTT and $SUN, as well as Huobi's native HT tokens derived from FTX. The move enables large traders to liquidate some of their Tron holdings while improving sentiment toward the Tron ecosystem.
The trading of TRX, and related assets, was restarted on FTX in Asian hours on Thursday, moving prices to over $2.50.
FTX Announcement Regarding the Tron Credit Facility:
We are pleased to announce that we have reached an agreement with Tron to establish a special facility to allow holders of TRX, BTT, JST, SUN, and HT to swap assets from FTX 1:1 to external wallets.
— FTX (@FTX_Official)
Nov 10, 2022
Crisis averted? What's next?
Crypto leaders are worried about the cascading effect, considering that FTX’s failure could spread through the industry, similar to how the collapse of Lehman Brothers rippled through the global economy in 2008.
Whatever the outcome of the FTX crisis, it is abundantly clear that the crypto industry will face significant challenges due to the fallout. SBF lobbied for DeFi regulations in recent months to influence the government's rules on the space.
The community widely criticized SBF for his proposal for the DCCPA bill that would jeopardize DeFi's future.
Yea, I'm not happy with @SBF_FTX 's proposal. It's no secret.
Yes, I went off on his practices that I think are injurious to the space.
Yes, I'd prefer he didn't industrial farm and nuke everything.
But I hope he listens to the outcry and reconsiders his proposal.
— scoopy (@scupytrooples)
Oct 21, 2022
With his credibility shattered, lawmakers on Capitol Hill may quickly take a tough stance on cryptocurrency regulation.
The 2022 crypto winter has made it more apparent than ever that the industry tends to glorify unscrupulous figures. SBF, Do Kwon, 3AC, and Alex Mashinsky have all fallen from grace and emerged as villains this year.
While the FTX drama may negatively impact the industry, it's worth zooming out to see the big picture. Bad news events can impact crypto prices, as the market has demonstrated in the last 24 hours. Still, bear markets can allow investors to accumulate fundamentally sound assets at a discount. Despite the negative press, the promise of blockchain technology has not changed. In fact, it could be argued that the events highlight the need for DeFi.
In a year of catastrophic crypto events, including the Terra/LUNA debacle, FTX collapsing may prove to be the worst. The news of FTX's liquidity crisis and Binance's reluctance to acquire its rival exchange has already sent markets into a tailspin. In just 24 hours, the global crypto market cap has dropped more than 13% to around $790 billion, falling below $1 trillion for the first time in months.
There are now many questions: In FTX’s bankruptcy, will user deposits be frozen? We need to determine how much of the user funds FTX still has on hand. Nonetheless, given the number of big-name institutions that have poured money into the FTX platform, a traditional bankruptcy could have a disastrous financial impact on the entire industry.
But Sam Bankman-Fried said he is sorry though:
1) I'm sorry. That's the biggest thing.
I fucked up, and should have done better.
— SBF (@SBF_FTX)
Nov 10, 2022
The SEC has since launched an open investigation into FTX, which perfectly aligned with the announcement of FTX filing for chapter 11 bankruptcy as SBF resigned.

The cascade effects of this event can only be speculated as of now, but we will be sure to keep you in the loop with any updates on this story!
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