FTX Collapse Timeline: What Happened to FTX in November 2022

FTX collapsed in eleven days. On November 2, 2022, CoinDesk published a leaked Alameda Research balance sheet showing it was largely backed by FTX's own FTT token. A bank run followed, and on November 11 FTX, FTX US, Alameda, and roughly 130 affiliated companies filed for Chapter 11 bankruptcy with an approximately $8 billion shortfall in customer funds. Sam Bankman-Fried was convicted of fraud in 2023 and sentenced to 25 years.

1. The Rise: A $32 Billion Exchange and Its Trading Arm

• Event Background: Sam Bankman-Fried founded Alameda Research as a quantitative trading firm in 2017, initially profiting from arbitrage between Asian and US bitcoin prices. In May 2019 he and Gary Wang launched FTX, a derivatives-focused exchange that grew rapidly on the strength of its products and aggressive marketing.
• Event Details: By January 2022, FTX had raised at a $32 billion valuation from investors including Sequoia Capital, SoftBank, Temasek, and the Ontario Teachers' Pension Plan, and FTX US raised $400 million at an $8 billion valuation. The company bought naming rights to the Miami Heat's arena, ran a Super Bowl advertisement, and signed athlete endorsements. Bankman-Fried became a prominent political donor and testified before Congress on crypto regulation, positioning FTX as the industry's responsible actor.
• Technical Architecture Innovation:
  • FTT as a balance sheet asset: FTX issued its own exchange token, FTT, which conferred fee discounts and was partially bought back with exchange revenue. Most FTT was held by insiders and never traded, so its market price reflected a thin float. Treating that price as the value of the entire holding was the accounting decision at the center of everything that followed.
  • An exchange and a hedge fund under one owner: FTX operated the market; Alameda traded on it. Traditional finance separates these functions through custody rules and segregation requirements. Here they shared a founder, and eventually shared customer funds.
  • A special exemption in the risk engine: FTX's automated liquidation system, marketed as a major safety innovation, contained a provision exempting Alameda's account from liquidation and allowing it a negative balance. Prosecutors later established that this code was added at Bankman-Fried's direction.
• Direct Impact: FTX became one of the largest exchanges in the world with roughly a million creditors by the time it failed.
• Long-term Significance:
  • The credibility transfer: Institutional investors, regulators, and media treated FTX as legitimate partly because other institutions did. Due diligence appears to have been thin across the board; several investors later wrote their positions to zero.
• Lessons Learned: Governance failures are invisible from outside. FTX had no board, no independent accounting function, and no separation between the exchange and its largest trading counterparty — none of which required a leak to be discoverable, only a question that was not asked.
• Subsequent Development: Court-appointed CEO John J. Ray III, who had overseen the Enron bankruptcy, wrote in his November 17, 2022 declaration that he had never seen "such a complete failure of corporate controls" in over forty years of restructuring work.

2. November 2-11, 2022: Eleven Days

• Event Background: The collapse began with a document, not a hack or a market crash.
• Event Details: On November 2, 2022, CoinDesk published a leaked balance sheet showing Alameda Research held roughly $14.6 billion in assets, of which several billion were FTT — its counterparty's own token — rather than independent collateral. On November 6, Binance CEO Changpeng Zhao announced his exchange would liquidate its entire FTT position, worth around $2.1 billion; Alameda CEO Caroline Ellison publicly offered to buy it at $22 per token. On November 7, Bankman-Fried tweeted that FTX was fine and assets were fine; the tweet was later deleted. On November 8, FTT fell below $22 and withdrawals surged past what FTX could meet; Binance announced a non-binding letter of intent to acquire FTX. On November 9, Binance withdrew after brief due diligence. On November 10, Bahamian regulators froze FTX Digital Markets' assets and Bankman-Fried said Alameda was winding down. On November 11, FTX, FTX US, Alameda Research and approximately 130 affiliated entities filed for Chapter 11 in Delaware; Bankman-Fried resigned and John J. Ray III became CEO. Within hours of the filing, between $400 million and $477 million was drained from FTX wallets in unauthorized transfers.
• Technical Architecture Innovation:
  • Why a bank run reveals fraud instantly: A solvent exchange holds customer assets one-for-one and can process any volume of withdrawals. Only an exchange that has lent out or spent those assets fails under withdrawal pressure. The run did not cause the shortfall; it revealed one that already existed.
  • The unauthorized transfers: The post-filing drain was later attributed by US prosecutors to a group charged in 2024 with a SIM-swapping conspiracy that targeted the exchange during its final hours.
• Direct Impact: Bitcoin fell from around $21,000 to under $16,000 within days, and roughly a million creditors lost access to their accounts.
• Long-term Significance:
  • A single tweet as a trigger: Zhao's announcement is the clearest example in crypto of a competitor's public statement precipitating a rival's collapse, and it prompted a broader debate about market conduct.
• Lessons Learned: If an institution cannot survive its customers asking for their money back, it was already insolvent. The run is the audit.
• Subsequent Development: Proof-of-reserves publications became an industry norm within weeks, though most early versions showed assets without corresponding liabilities and were criticized as incomplete.

3. How Customer Funds Reached Alameda

• Event Background: The central question of the case is mechanical: how did billions of dollars of customer deposits end up funding a hedge fund's losses?
• Event Details: Trial evidence established several channels. Some customers wiring dollars to FTX sent them to a bank account controlled by Alameda, because FTX lacked its own banking relationships early on, and those funds were never segregated. FTX's internal systems recorded a growing Alameda liability in an account that was exempted from the risk engine. Alameda borrowed against FTT it had received from FTX, which meant the collateral's value depended on the solvency of the borrower's counterparty. The proceeds funded venture investments, real estate in the Bahamas, political donations, and losses from the 2022 market decline.
• Technical Architecture Innovation:
  • Circular collateral: FTT issued by FTX, held by Alameda, pledged back to FTX as collateral for loans of customer assets, is a loop in which no external value ever enters. It functions only while the token's price holds, and the token's price depends on the loop.
  • No segregation, no reconciliation: Ray's filings described the absence of reliable books, the use of informal chat tools for approving expenditures, and no complete list of employees or bank accounts. This was not sophisticated concealment; it was an absence of records.
  • Terra's role in the timing: Alameda's losses widened sharply during the May-June 2022 contagion, when lenders recalled loans across the industry. The transfers that made the shortfall unrecoverable are dated to that period.
• Direct Impact: The shortfall in customer funds at filing was approximately $8 billion, with the estate later reporting recoveries against a stated gap of about $8.7 billion.
• Long-term Significance:
  • Custody rules moved to the center of policy: Post-FTX legislation and rulemaking in multiple jurisdictions focus specifically on segregation of customer assets, conflicts between exchange and proprietary trading, and independent custody.
• Lessons Learned: An asset you issue yourself is not collateral. Its value disappears at exactly the moment you need it.
• Subsequent Development: Caroline Ellison, Gary Wang, and Nishad Singh all pleaded guilty and cooperated; Ellison was sentenced to two years, Wang and Singh received no prison time, and FTX Digital Markets co-CEO Ryan Salame received seven and a half years on campaign finance and money transmitting charges.

4. Bankruptcy, Conviction, and Repayment

• Event Background: The criminal case and the bankruptcy ran in parallel, and produced strikingly different outcomes.
• Event Details: Bankman-Fried was arrested in the Bahamas on December 12, 2022 and extradited on December 21. On November 2, 2023, a Manhattan jury convicted him on seven counts of fraud and conspiracy, and on March 28, 2024 Judge Lewis Kaplan sentenced him to 25 years in prison and ordered forfeiture of about $11 billion. The bankruptcy estate, meanwhile, recovered far more than expected by liquidating venture holdings — including a stake in Anthropic sold for billions — and by benefiting from the recovery in crypto prices. The reorganization plan became effective on January 3, 2025, and distributions to creditors began on February 18, 2025, with further rounds through 2025 and 2026. Most creditors are being repaid more than 100% of their claims as valued at the petition date.
• Technical Architecture Innovation:
  • Petition-date valuation, and why creditors object: US bankruptcy law fixes claims in dollars as of the filing date. Bitcoin was around $16,000 on November 11, 2022. A creditor who deposited one bitcoin receives that dollar value plus interest, not the bitcoin — so a "119% recovery" can still mean receiving a fraction of the asset's later value. This is the same structural issue Mt. Gox creditors faced, resolved differently there.
• Direct Impact: FTX became the rare large fraud where most customers were made whole in nominal dollar terms, while the perpetrators received substantial prison sentences.
• Long-term Significance:
  • Denomination is the unresolved question: Whether crypto claims should be valued in dollars at filing or repaid in kind is now a central issue in every crypto insolvency, and the answer has varied by jurisdiction.
  • A closing chapter for the 2022 cycle: With FTX distributions underway and the criminal cases concluded, the legal aftermath of the 2022 collapse is largely resolved.
• Lessons Learned: A high recovery rate is not evidence that a fraud was small. It reflects asset prices at the time of liquidation and the diligence of the estate's professionals.
• Subsequent Development: Bankman-Fried has appealed his conviction, and the estate has continued to pursue clawback litigation against recipients of FTX funds, including political and philanthropic beneficiaries.

5. Common Misconceptions About the FTX Collapse

• Event Background: FTX is routinely cited in arguments about blockchain technology that the facts of the case do not support.
• Event Details: FTX was not hacked in the collapse itself, was not a DeFi protocol, and did not fail because of anything on a blockchain. It was a centralized company that took custody of customer assets and spent them. Nothing about the failure required cryptocurrency: the same conduct with equities or commodities would have produced the same outcome, and has, repeatedly, in other markets.
• Technical Architecture Innovation:
  • On-chain visibility helped rather than hurt: The public ledger is why the run was visible in real time, why investigators could trace the post-filing drain, and why the estate located assets quickly. The opacity was in the company's internal books, not in the blockchain.
  • DeFi protocols kept working: Throughout November 2022, Aave, Compound, Uniswap, and MakerDAO processed liquidations and withdrawals normally. The failures of 2022 were concentrated almost entirely in centralized custodians and lenders.
• Direct Impact: The distinction matters for policy. Regulation aimed at custodial intermediaries addresses what actually failed; regulation aimed at protocols does not.
• Long-term Significance:
  • The strongest argument for self-custody: "Not your keys, not your coins" gained its second great demonstration in eight years, and hardware wallet sales spiked in the weeks after the filing.
• Lessons Learned: The recurring failure in crypto is not the technology but the reintroduction of trusted intermediaries without the controls that traditional finance imposes on them.
• Subsequent Development: Exchanges now routinely publish Merkle-tree proof-of-reserves with third-party attestation, and several major jurisdictions have adopted or proposed rules requiring segregated customer asset custody.