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FTX announced that it has moved to file for Chapter 11 bankruptcy protection, along with FTX US, Alameda Research and approximately 130 additional affiliated companies. FTX Digital Markets, FTX Australia, FTX Expess Pay and LedgerX (which does business as FTX US Derivatives) are not included.

Binance has reached a deal to buy the rival crypto exchange FTX for an undisclosed amount. Binance CEO Changpeng Zhao announced that "there is a significant liquidity crunch" at FTX and that after FTX asked for Binance's help, they "signed a non-binding letter of intent, intending to fully acquire FTX and help cover the liquidity crunch." Zhao added that Binance will be conducting full due diligence in the coming days, and the firm has the discretion to pull out from the deal at any time. Days earlier, Binance had announced that it would sell all of its FTX FTT governance tokens, which set in motion the chaos that resulted in FTX's liquidity woes.

Over $600 million in crypto left FTX's wallets late Friday (November 11, 2022) and many FTX wallet holders also reported that they were seeing $0 balances in their FTX.com and FTX US wallets. The bankrupt exchange's general counsel Ryne Miller said the exchange was "investigating abnormalities with wallet movements related to consolidation of FTX balances across exchanges - unclear facts as other movements not clear." Shortly after that, he said that the firm had initiated precautionary steps to move all digital assets to cold storage.

"A popular theory about what happened to FTX - the one I wrote about above, and yesterday - is that FTX issued its FTT token, and it had a market price, and Alameda got a lot of it, and FTX loaned Alameda money against it, and then Zhao was "the guy calling and saying, no, this thing's actually worthless," and Alameda could "never, you know, give the dollars back," and that was the end of FTX."

"There's a turf war going on between the FTX Digital Markets (FTX DM) liquidation in the Bahamas and the FTX Trading Ltd bankruptcy proceedings in the U.S. We wrote about it earlier, along with some of the fishy stuff going on in the Bahamas.  "

Crypto-asset exchange FTX is working with CM-Equity on a pre-listing futures market for the Coinbase initial public offering (IPO). FTX first partnered with CM-Equity when launching its tokenized stock spot and futures markets in October 2020. FTX also launched a pre-IPO market for Airbnb the day before the firm's December 10 stock trading debut. However, FTX prohibits U.S.-based traders from accessing Coinbase futures.

Among one of the most significant firms entangled in the FTX collapse is the Digital Currency Group, whose subsidiaries include Genesis, Grayscale, CoinDesk, Foundry, and other companies. Genesis, in particular, is under the spotlight because, as an institutional lender, they may have extended capital to entities embroiled with the FTX/Alameda collapse. Genesis has at least $175M stuck on FTX, and also had large exposure including unsecured loans to Three Arrows Capital (3AC) before it collapsed in June. On November 16th, Genesis halted withdrawals and new loan originations following FTX's fall... Genesis connects institutional investors to digital asset markets allowing them to trade, borrow, hedge and more. Genesis is heavily used throughout the industry, including by centralized exchanges like Gemini for their "earn" program which allows customers to earn yield off of their holdings. Last week, Gemini Earn halted withdrawals after Genesis halted withdrawals... Also, Genesis's lending arm, which is widely integrated into various services that offer yield on crypto, may have been affected by offering loans that FTX or Alameda will not repay. DCG has been allegedly looking to raise capital, up to $1B, with little interest from investors balking at a previously undisclosed $1.1B loan from DCG to Genesis, with Grayscale being the only assets receiving any meaningful interest.

Tether and Circle, the issuers of USDT and USDC, have both moved to allay fears that their US dollar-pegged stablecoins are directly exposed to the fallout from the FTX debacle. CTO Paolo Ardoino said that Tether has no exposure to FTX or Alameda, although Alameda has previously redeemed a lot of USDT, but no credit exposure has matured. CEO Jeremy Allaire said that Circle has never made loans to FTX or Alameda, and has never received FTX's native token, FTT, as collateral, nor has it ever traded or held a position in FTT. Interestingly, both USDT and USDC became briefly unpegged today (November 10, 2022), with USDT spiking down, and Circle spiking up

"Crypto exchange FTX saw around $6 billion of withdrawals in the 72 hours before Tuesday morning, according to a message to staff sent by its CEO Sam Bankman-Fried that was seen by Reuters. In a surprise move, Changpeng Zhao, boss of major rival Binance, said on Tuesday the company signed a nonbinding agreement to buy FTX's non-U.S. unit, FTX.com, to help cover a "liquidity crunch" at FTX."

The FTX collapse was a failure of centralized finance (CeFi), not decentralized finance (DeFi). If there is a silver lining for the FTX fiasco, it is a reminder of the importance of decentralization. Like the financial institutions that collapsed in 2008, the CeFi economic incentive is to under-collateralize and take risks with user funds, play political games, and cozying up to regulators. DeFi platforms are designed to preserve the benefits introduced by Bitcoin and magnified by Ethereum: permissionless, transparency, censorship resistance and self-sovereign custody of assets.

Amid growing concerns over centralized cryptocurrency exchanges in the wake of the FTX crisis, investors are increasingly moving to hardware crypto wallets. Hardware wallet provider, Trezor, saw its sales revenue surge 300% week-on-week and it's still growing in the aftermath of the FTX debacle. Ledger, a major rival hardware wallet supplier, has also recorded a significant surge in demand for its devices recently as well. And now even some of the biggest crypto exchanges have started promoting the need for self-custody. Binance CEO Changpeng Zhao admitted on November 14 that centralized exchanges may no longer be necessary as investors would shift to self-custodial solutions like hardware or software wallets.

FTX has a gaping hole in its balance sheet that has existed for a long time. We don't know exactly how long, but the size of the estimates (ranging from $6-$10 billion) suggests several months if not years. FTX CEO Sam Bankman-Fried (SBF) has been trading while insolvent. He's not the only crypto oligarch to do so: Celsius's Mashinsky also traded while insolvent for an extended period of time.

"The Securities Commission of The Bahamas on Wednesday released a statement justifying its move to cease the customer assets of the local FTX entity, FTX Digital Markets Ltd (FDM). It came after several questions were raised against the action of the Bahamian regulator." https://www.scb.gov.bs/wp-content/uploads/2022/11/SCB-Issues-Statement-on-Transfer-Motion.pdf

"Billionaire Sam Bankman-Fried's cryptocurrency empire is officially broken into two main parts: FTX (his exchange) and Alameda Research (his trading firm), both giants in their respective industries. But even though they are two separate businesses, the division breaks down in a key place: on Alameda's balance sheet, according to a private financial document reviewed by CoinDesk. (It is conceivable the document represents just part of Alameda.) That balance sheet is full of FTX - specifically, the FTT token issued by the exchange that grants holders a discount on trading fees on its marketplace. While there is nothing per se untoward or wrong about that, it shows Bankman-Fried's trading giant Alameda rests on a foundation largely made up of a coin that a sister company invented, not an independent asset like a fiat currency or another crypto. The situation adds to evidence that the ties between FTX and Alameda are unusually close."

"Alameda and FTX seem to have printed FTT, pumped its price using customer assets - FTX was quite open that it was the FTT market maker, and there's no other real demand - and used the mark-to-market value of their illiquid made-up token as collateral for loans, or as evidence that pension funds should invest in crypto companies. This works great while number is going up!"

"Was FTX already insolvent when the run happened? Yes. The "liquidity crisis" that brought it to its knees was caused by its insolvency, not vice versa. Will depositors lose money? Almost certainly. FTX has a gaping hole in its balance sheet, and no one seems remotely interested in plugging it."

FTX launched its Coinbase Pre-IPO tokens (CBSE) on December 22 as part of its Tokenized Stocks product line. Coinbase is currently valued at $8 billion, although the company itself has no actual shares on the market yet. The CBSE tokens will convert to the equivalent share prices at the end of Coinbase's first day of public trading (market capitalization divided by the total number of shares). https://ftx.com/equities_terms/KID_CBSE.pdf

Crypto exchange FTX has listed quarterly futures on tokenized stocks, offering up to 100x leverage. FTX partnered with German custody services firm CM-Equity, and Swiss tokenization solutions provider Digital Assets, for the new 24/7 offering. The underlying tokens, which allow traders to buy fractions of shares, are redeemable for the underlying stocks. As with FTX's other products, its equity trading offering won't be available in the United States.

FTX business misused customer funds and lacked trustworthy financial statements or any real internal controls, according to John Ray III, a veteran insolvency professional who oversaw the liquidation of Enron. In a US court filing on November 17, 2022, he said that FTX was the worst case of corporate failure that he had seen in his more than 40-year career. "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here."

According to a Reuters report, FTX chief Sam Bankman-Fried transferred at least $4 billion in FTX funds to Alameda Research, including native token FTT and shares in Robinhood. The transfers were made after Alameda, Bankman-Fried's trading firm, suffered losses from deals in May and June, including a loan agreement with Voyager Digital, Reuters said, citing people close to the subject. These funds included customer deposits.