FTX Crash Witness Account: Big Losses, Panic, and Tears

On the evening of November 8th, I landed in Hong Kong. At that time, I had already read about the doubts regarding Alameda's balance sheet on Twitter. The report by Coindesk further intensified market concerns. Caroline, the CEO of Alameda, stated that the balance sheet did not fully cover all of Alameda's assets. Although shortly after, Binance's CEO CZ announced that he would sell approximately $500 million worth of FTT tokens he owned. Caroline responded that Alameda would be able to absorb the selling pressure of FTT in the market and provided a "hard floor" price of $22 for FTT when the market price was $25, and this was just the beginning of the story.

Upon starting my job, my Alameda colleague who guided me into the job assured me of Alameda and FTX's solvency, even ridiculing those who believed Alameda and FTX were insolvent. On my first official day of work, I entered the office at 11 a.m. In this floor, about two-thirds of the employees were from FTX and one-third from Alameda. As I walked into the office, FTT had already dropped below the $22 "hard floor" and was trading at $17.

There were some traders in the office whose job was to sell popular assets and inject funds into FTX to handle user withdrawal demands, but at that moment, they were not conducting any actual operations. Under Caroline's instructions, the traders placed a buy order for 10 million FTT at $14, worth $140 million, to prevent the coin price from further rapid decline. This was because once the price dropped below $14, Genesis and some other lenders were highly likely to demand repayment of the loans they had provided to Alameda. If this happened and Alameda failed to repay the funds promptly, Alameda would face liquidation, which would be an even more unacceptable situation.

During the onboarding process, I was constantly monitoring these activities they were doing. This "battle" lasted for about 15 hours, during which Alameda was trying to find every penny possible to support the price of FTT and inject funds into FTX, but during this time, some of Alameda's lenders began demanding repayment. At that moment, Caroline had to make a decision between FTX and the lenders, deciding which party should be given priority for the available funds.

As time passed, the traders gradually realized the severity of the situation, and the tension and despair spread rapidly throughout the office. The pace of FTX withdrawals accelerated, and the liquidity available for cashing out was almost depleted. Although Caroline and the other traders seemed to still believe that Alameda had enough money to pay FTX users' withdrawals, their confidence was clearly waning. It was an extremely difficult battle, as Alameda could only barely keep up with FTX's withdrawals until SBF shocked the entire industry with a tweet ── he was negotiating with Binance to acquire FTX.

The smoke of the battle seemed to dissipate in an instant, and everyone in the office except Caroline appeared to be shocked. This was followed by a brief moment of surprise, and then the atmosphere in the office seemed to freeze again. Everyone fell silent for a moment, but everyone knew that the acquisition meant that FTX was really in trouble, and that's why SBF took such an extreme measure to save it.

The person next to me burst into tears because even as someone who had just started the job the day before, I could see that the company's future was no longer there. SBF only made this decision when he believed that Alameda did not have enough liquidity to support FTX users' withdrawals.

I stayed in the office for about two more hours, and the office was eerily quiet. Everyone was still doing what they had been doing before, trying everything to find money and prioritize filling the funding gap for Alameda's lenders. After that, I left the office, went home to sleep, and didn't return to the office until around 2 p.m. the next day.

On my "second day" at work, I felt like I was stepping into an office that was already "dead." Most FTX employees were absent, and even those who were there were not working, just chatting or making phone calls. Most of the Alameda team members were present, still dealing with the work from the previous night. I wasn't assigned much work until 11 p.m. that night when we had a company-wide meeting.

During the all-staff meeting, Caroline revealed the truth to us. Over a year ago, FTX began spending money extravagantly. They established various investment shell companies under the FTX or Alameda name to invest in various companies or illiquid assets, resulting in significant financial losses. For example, in one stage, FTX spent $1 billion to acquire a bankrupt crypto mining company, and Alameda spent tens of billions to acquire the FTX shares owned by Binance. Additionally, FTX purchased luxury apartments in the Bahamas, was constructing a more luxurious, letter F-shaped office, and invested heavily in sports sponsorships, endorsements, and advertising.

However, up until this point, FTX users' funds were safe. The subsequent crisis mainly arose because when Alameda borrowed from FTX, FTX's funds and FTT were used as collateral. Alameda was able to lend so much to FTX not only because of their own funds but also because they had many loans on hand. After all, at that stage, it was very easy for Alameda to obtain loans, and the huge gap in the balance sheet ultimately stemmed from this.

Some say that Alameda suffered huge losses in the Luna event, but this is inaccurate. In fact, during the crisis, Alameda's position in LUNA was even net short, so they did not lose money from it. However, the crisis led to defaults by institutions represented by 3AC, and Alameda suffered some losses due to lending to these defaulting companies.

At this point, SBF had to choose between two options: either let Alameda be liquidated or divert user assets from FTX to ensure Alameda's survival. SBF chose the latter and formally triggered the switch on this time bomb.

Not many people in the team knew how much of the user funds SBF had diverted to save Alameda, but Caroline admitted that FTX and Alameda could be liquidated and revealed to us that Binance had abandoned the acquisition of FTX due to the large gap in the balance sheet that could not be filled. At this point, everyone realized a harsh reality, that their funds on FTX and FTX's equity were now worthless.

Most of the Alameda and FTX employees had their salaries directly transferred to FTX accounts, and team members had the opportunity to receive FTX equity incentives, which had been a coveted benefit for everyone in the team. However, during the crisis, SBF and Caroline did not warn team members, causing most to lose all the wealth they had accumulated over the past few years, and some even lost all their savings. One FTX employee I spoke to cried because she lost the down payment for her house and car that she had stored in her exchange account.

Most Alameda and FTX employees accepted their losses but now also had to worry about potential legal issues they might face. Most were trying to find lawyers to defend themselves as they were likely to be sued and subpoenaed, and they would have to testify before the SEC or CFTC. Most innocent FTX/Alameda employees were also concerned about personal safety as their faces had been made public, and the office address in the Bahamas had been exposed.

Caroline allowed Alameda employees to choose to continue working in the coming weeks to continue liquidating and paying off the funds owed to FTX. However, most people I spoke to refused this option, and we all booked the earliest flights to leave Hong Kong.

I felt sorry for myself as well, as I had to start looking for a new job again just after starting, but this was clearly insignificant compared to the employees of FTX and Alameda. The world may think that Alameda simply gambled away people's money, but the reality is that daily trading was quite profitable, and Alameda employees were making +EV decisions. Caroline said she would not make any public statements about the matter, which means the world will not know what happened to most FTX/Alameda employees, and only SBF, Caroline, Gary, and a few others took their money. I hope the real truth will be exposed in the coming weeks to relieve the employees of their guilt - they lost more than anyone else, and it would be terrible if the world hated them for their suffering.

After the meeting, my mentor told me the best course of action was to leave and never show up in the office again. I booked a flight 10 hours after the meeting ended, leaving Hong Kong and returning to the United States.

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