What the chain records, and the run FTX could not hide

Graduate · enrolled learners

This lesson opens with FTX and Alameda Research, November 2022.

What happened

FTX was one of the largest cryptocurrency exchanges, tightly linked to the trading firm Alameda Research. On 2 November 2022 a leaked Alameda balance sheet showed its assets were dominated by FTT, a token FTX itself had issued, rather than independent assets. On-chain analysts then read the public wallets directly: FTX's exchange reserves were heavily concentrated in that same self-issued token, and as confidence broke, a visible outflow of customer assets accelerated into a run over 6 to 8 November. The exchange said it was fine. On 11 November it filed for bankruptcy with an estimated 8 billion dollar hole between what customers were owed and what remained. The addresses, balances and transfers were public the entire time; the collapse was off-chain, but its shadow was on-chain and readable days early.

The decision point

The people who read FTX's wallets in early November were not insiders and had no leak beyond the balance sheet that started it. They had a skill: they could ask the public chain what FTX actually held and what was actually moving, and the answers, concentrated reserves and an accelerating outflow, contradicted the company's reassurances days before the filing. This is the analyst's first and most important fact. A public blockchain is an immutable record of what moved, held by no one and readable by anyone, so it is evidence in a way a company's statement is not. It does not show intentions, off-chain debts, or private ledgers, and confusing what it does show for the whole truth is its own error. But what it shows, it shows to everyone equally, and learning to ask it is where analysis begins.

Recorded loss

$8,000,000,000

Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.

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