FTX balance-sheet disclosure, run and Chapter 11 collapse
FTX, Alameda Research, and 130 affiliated companies filed for Chapter 11 bankruptcy, with Sam Bankman-Fried resigning as CEO.
On November 11, 2022, FTX, Alameda Research, and approximately 130 affiliated companies filed for Chapter 11 bankruptcy protection in the United States, marking one of the most spectacular corporate collapses in cryptocurrency history. Sam Bankman-Fried resigned as CEO and was replaced by John J. Ray III, a restructuring specialist who had overseen the Enron liquidation, one of the most notorious corporate frauds in American history.
The bankruptcy filing confirmed what had become increasingly clear over the preceding days: FTX had catastrophically mismanaged customer funds, and billions of dollars were simply missing. The scale of the collapse was staggering, with estimates suggesting that over one million creditors were affected and losses could exceed $8 billion.
For Bitcoin and the broader cryptocurrency ecosystem, November 11, 2022, represented a watershed moment comparable to the Mt. Gox collapse in 2014. FTX had been more than just an exchange; it was deeply integrated throughout the crypto industry through investments, loans, and partnerships. The company's collapse triggered a cascade of secondary failures as other firms revealed their exposure to FTX.
The bankruptcy also represented the culmination of 2022's theme of centralized platform failures, which had begun with Terra/Luna in May and continued through Celsius, Voyager, and Three Arrows Capital. For Bitcoin advocates, FTX's collapse validated core principles that many in the broader crypto industry had abandoned: the importance of self-custody, transparency, and decentralization.
While Bitcoin's network continued operating normally throughout the chaos, processing transactions every ten minutes as designed, centralized platforms built on top of Bitcoin had proven catastrophically unreliable. The appointment of John J.Ray III, fresh from cleaning up Enron, suggested that what would be discovered at FTX might rival or exceed even that historic fraud in terms of corporate malfeasance.
On November 6, 2022, Binance CEO Changpeng Zhao, known as CZ, announced on Twitter that Binance would be liquidating its entire position in FTT tokens, worth over $500 million, citing 'recent revelations that have come to light'—a clear reference to the CoinDesk report published four days earlier. CZ's tweet stated that the decision was made as part of Binance's risk management strategy and compared it to their exit from LUNA holdings earlier in the year.
The announcement immediately triggered panic among FTX users, who began rushing to withdraw their funds from the exchange, fearing that Binance's large sale would crash the FTT price and potentially destabilize FTX. What began as a trickle quickly became a flood, with billions of dollars in withdrawal requests overwhelming FTX's liquidity.