FTX, 2022Easy

Not a market accident: customer assets that were supposed to sit in custody were spent, and a run revealed there was nothing behind the balances.

3 min read · 468 words · Updated 4 Sep 2026

What happened

• 2019–21 — FTX grows into one of the largest crypto exchanges, alongside the affiliated trading firm Alameda Research.
• 2 November 2022 — a press report shows that much of Alameda's balance sheet consists of FTT, a token issued by FTX itself, rather than independent assets.
• 6–8 November 2022 — customers withdraw en masse. The exchange cannot meet redemptions; a rescue letter of intent from a competitor is signed and then withdrawn within a day.
• 11 November 2022 — FTX files for bankruptcy. Court filings later describe customer assets used to fund affiliated trading and other spending, with a shortfall in the billions.

The mechanism

• An exchange balance is an IOU. Depositing coins on a venue means holding a claim against the venue, not the asset itself — a distinction invisible in the app and decisive in bankruptcy (see custody).
• Commingling removed the protection that segregation is supposed to provide. In regulated brokerage, client assets sit apart precisely so that the firm's failure is not the client's.
• Self-issued collateral is circular: valuing a balance sheet with a token you print, whose price depends on your solvency, means the assets evaporate exactly when they are needed.
• The run mechanics were ordinary. Any institution funded by instantly withdrawable liabilities and holding illiquid assets fails this way; the technology changed nothing.

What it teaches

• Custody is the first question in this asset class, not an operational footnote. "Not your keys, not your coins" is a legal statement.
• Segregation and audits are the boring features that matter. Proof-of-reserves attestations became standard afterwards because their absence was the story.
• Yield with no named source is the source. If nobody can explain who pays it and why, you are funding it.
• Never keep more on a venue than you can watch become an unsecured claim — a rule that generalises far beyond crypto.

The mechanisms behind this

Every case on this site is an instrument or a mechanism doing exactly what it was built to do, in a situation nobody had pictured. These are the pages that explain the machinery:

• Clearing & settlement — custody, segregation, and what an exchange balance actually is.
• What happens if my broker goes bust? — the same question, answered for a regulated broker.
• Regulation & investor protection — what segregation is meant to do, and what it does when it is not real.
• Crypto spot — holding the coin versus holding a claim on somebody who holds the coin.