What happened
On 11 November 2022, FTX Trading Ltd and around 130 affiliated entities filed for Chapter 11 bankruptcy in the District of Delaware. Sam Bankman-Fried resigned, and John J. Ray III, who administered the Enron estate, was appointed chief executive.
The petition estimates assets and liabilities each in the range of 10 to 50 billion dollars, and lists more than 100,000 creditors. Reporting this week put around 10 billion dollars of customer deposits as having been routed to Alameda Research, an affiliated trading firm, and spent on trading, investments and loans while customers were told their funds were held separately. The size of the shortfall is not established. Hours after the petition, several hundred million dollars left FTX wallets in transfers the company's own support channel called unauthorised.
What it changes
Nothing technical. This is the point that matters and the one that gets lost in the spectacle of the fraud.
A customer balance on an exchange is a line in that company's database. It is a record of what the company owes you. The coins backing it, if they exist, are the company's, held in the company's wallets, under the company's keys. When the company files, that line stops being a balance and becomes a claim, and you become an unsecured creditor standing in line behind secured lenders and administrative costs, with the outcome and the timing decided by a court.
The screen did not change on the way down. It said the same number on 10 November as it had in October. The number was never a statement about coins you controlled; it was a statement about a company's willingness and ability to pay, and that is only visible when it stops being true.
This is the whole content of the phrase "not your keys, not your coins". It is not a claim about ideology. It is a description of who a bankruptcy judge decides for.
What it does not change
Bitcoin's ledger ran through the entire episode without interruption. Blocks kept arriving every ten minutes or so, and every coin held under keys its owner controls is exactly where they left it, spendable throughout. No court order reached them, because there was nobody to serve.
It also does not make exchanges unusable. An exchange is the normal way to acquire bitcoin and the risk is bounded by the amount and the time it sits there. What FTX prices correctly is the difference between a venue you pass through and a place you leave savings. That is the same distinction Celsius made visible in June, from a lender rather than an exchange.
Context
The run took nine days from a single document. CoinDesk published Alameda's balance sheet on 2 November, showing a large share of its assets in FTT, a token FTX had issued itself. Changpeng Zhao said on 6 November that Binance would sell its FTT position. Withdrawals accelerated, FTX stopped processing them on 8 November, and Binance signed a letter of intent to buy the international exchange that day and walked away the next. The Bahamian regulator froze FTX Digital Markets' assets on 10 November.
Almost nothing about the outcome can be said today: how much is missing, where it went, which of the 130 entities hold anything, and what US authorities do.
One thing can, because it is a rule rather than a forecast. Claims in Chapter 11 are valued in dollars at the petition date, which is today. A creditor who had one bitcoin here has a claim for the dollar value of one bitcoin as of this afternoon, whatever the price does between now and whenever this resolves. Being made whole in a bankruptcy means whole in dollars, on the court's date, which for a bearer asset is not the same as whole at all. That applies to every exchange, including the ones that are fine.