28 Apr 2025

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FTX bankruptcy: who is behind it

In a few days, we all witnessed how one of the largest cryptocurrency CEX-exchanges came very close to bankruptcy. Who is to blame for this and where has it all started?

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The events of the last few days have turned the entire market upside down. The first hints of the growing market recovery were replaced by an all-consuming downtrend. This was influenced by one single event – one of the largest centralized FTX exchanges was on the verge of unexpected bankruptcy. A week ago, no analyst could have predicted such a scenario, not even in their wildest dreams. Now, when the market has lost 20% of its capitalization in a few days, many are interested in the idea – where has it all started, and who is behind it?

How it started

And it all started with the Coindesk report, published in early November, which caused the first wave of negativity in the market. The report revealed that a large part of the trading company assets (actual net worth) with functions of the hedge fund Alameda Research is concentrated in the domestic tokens of the exchange FTX (FTT). Alameda Research is a subsidiary of FTX, both share a common owner, Sam Bankman-Fried, who personally manages the exchange and oversees the fund's operations.

The first position in the portfolio of assets worth $3.66 billion is held by unlocked FTTs. The second is “collateral FTT” (secured collateral) amounts to $2.16 billion. Taking into account that the total amount of assets is $14.6 billion, it turns out that various FTT tokens account for 40% of the total portfolio.

“It was interesting to learn that a significant share of the net capital in Alameda's business consists of the native token of the FTX exchange, which is fully controlled by them and emitted out of thin air,” said Corey Klipsten, CEO of the Swan Bitcoin investment platform, who is known for his critical attitude towards all altcoins.

All inquiries from journalists on this matter were ignored by both Alameda Research and the FTX exchange. The FTT token reacted to this event with a not significant drop of 15%

November 6. Influence of CZ.

Next, the co-founder and CEO of the Binance exchange, Changpeng Zhao, entered the theater of cryptocurrency (almost military) operations. On November 6th, he issued a series of Twitter posts that added to the FUD in the market and laid a timed mine for it.

In the first tweet, he promised that Binance will get rid of all FTT tokens in the near future, and in the second hinted that “this move is not a declaration of war against anyone, but only risk management after the unfortunate experience with LUNA.”

Comparing FTT to LUNA was not a very friendly move considering the direct competition between FTX and Binance.

Alameda Research CEO Caroline Alison reacted to such a criticism, who also offered via Twitter to buy all FTT from Binance at a price of $22, which at that time was close to the market price. She counted on an OTS agreement that would not significantly affect the market exchange rate of the token. But CZ left Caroline's tweet unanswered.

At the same time, FTT continued to lose value, but not at a critical pace just yet.  

November 7. “Everything is calm in Baghdad.”

FTX owner and CEO Sam Bankman-Frieda smelled that something's burning, so on November 7, he sought to reassure investors and slow down the panic sell-off of the FTT token that had already begun to gain momentum.

In the first tweet, he assured that all false rumors are spread by sneaky competitors and that FTX token and assets in general are fine.

In his second tweet, he assured that the FTX exchange fulfills its obligations in full and does not prevent users from withdrawing funds. And if there are delays, then the banks and slow nodes are to blame, not the problems in the company.

Subsequently, he reminded that the exchange is under the strict control of regulators, has passed audits, has significant reserves (over $1 billion) and a long history of being on the market, a lot of satisfied customers and strives to be honest with them.

And the more Sam tried to convey to the public that “everything is calm in Baghdad”, the more worried investors became. The price of the FTT token continued to fall, and users increasingly complained about the delay or inability to withdraw assets from the exchange. 

November 8. Falling market. Hope for Binance.

The tweet battles continued this morning: various partners accused Alameda Research of violating agreements and selling certain assets early (100 million BIT for $30 million), but it didn't matter anymore. The train with the name “FUD” gained speed and collapsed the rate of FTT in one day by almost 90% – from $22 to $3. Assets that were on the balance sheet of the exchange FTX and Alameda Research also fell in price in front of our eyes. For example, Solana (SOL) lost almost half of its value. The “domino” effect worked – the market entered a bearish phase, the graphs of all assets changed from green to blood-red.

Subsequently, CZ reported that the FTX platform contacted Binance begging for help due to catastrophic low liquidity and inability to meet obligations. According to him, both exchanges have already signed a letter of intent and agreed on a partnership that involves the acquisition of the FTX exchange by Binance.

On the morning of November 9, the FTX exchange through the official Telegram channel announced the withdrawal operations suspension. In recent days, according to Reuters, more than $6 billion has been withdrawn from the exchange. The price of FTT has fallen to $2.85 per coin.

November 9. There will be no acquisition.

The next day it became clear that Binance would not be able to save the troubled FTX. From various sources, it became known about warnings from several Binance regulators with calls not to enter into an agreement, which also violates current legislation.

The fact is that US antitrust laws, such as the “Sherman Act” and others, prohibit direct competitors from protecting each other. Therefore, the acquisition agreement will be declared null and void and Binance may be held liable. Apparently, CZ did not like this prospect very much.

Binance also hinted that there are certain questions about FTX from other government services, which finally put an end to the deal.

Who is to blame?

Many candidates claim the role of culprits. First of all, Alameda Research and FTX are to blame for being used as collateral and filling capital with their own token. A certain fault also lies with Binance, which, in the person of CZ, incited FUD and tried to drown the competitor, but in turn took a hit together with all market participants. You can also blame the American regulators, who prohibit lending a helping hand to a troubled company. Although they are only doing their job and urge not to violate the current, albeit not always perfect, legislation. 

What we have and what to expect

In less than a week, the market capitalization decreased by 20% – from $1 trillion to $800 billion. Sam Bankman-Frieda actually lost more than $14 billion in one day and left the “billionaires' club.” Most cryptoassets have lost at least the same 20% in value. The FTT token is already trading for $2 (-93%). The Fear & Greed index indicates extreme fear among investors, freezing at 22. The market is entering another recession, dominated by bears. The only question is, is this the bottom already, or will they knock from down under…

The strategy of sitting for a while in stablecoins until the fall stops and the FTX situation is resolved is not the worst for now. In addition, after that it will be possible to purchase assets at a significant discount. But, unfortunately, not everyone will survive another crypto winter.

And finally, the Alameda Research website is no longer working…

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