Decision
At noon Eastern on November 6, an institutional customer's treasury and risk committee must decide whether to withdraw, cap or maintain FTX.com custody and trading exposure. The evidence boundary closes one second earlier. The recommendation is an urgent staged reduction: stop new unsecured exposure, test small withdrawals, remove excess balances as transfers settle and retain only the minimum operational balance until entity-specific verification closes the custody and liquidity gaps. This is a risk-limit decision, not a conclusion that FTX Trading is insolvent or that anyone committed misconduct. judgment.ftx.cutoff.reduce-exposure source · ftx.cutoff.coindesk-alameda source · ftx.cutoff.zhao-liquidation source · ftx.cutoff.terms
Business and custody model
Management described FTX.com as a vertically integrated technology stack joining matching, custody, settlement, clearing and risk management. That may reduce transaction friction, but it also concentrates functions whose operational and legal separation matters when customers need assets back. claim.ftx.cutoff.integrated-model source · ftx.cutoff.sbf-house-testimony
The May 2022 terms are important positive evidence. They stated that title to customer digital assets remained with the customer, that the assets were neither FTX Trading property nor loanable to it, and that customers could withdraw subject to outages, downtime and other policies. The same terms said balances lacked public or private deposit insurance and described collateral and lending risks in applicable services. The correct reading is account- and service-specific; the provisions cannot be collapsed into either “all balances were unencumbered” or “all balances were lent.” claim.ftx.cutoff.contract-custody claim.ftx.cutoff.contract-risk-scope conflict.ftx.cutoff.contract-scope source · ftx.cutoff.terms
Contract promises are not an asset reconciliation. Management itself told Congress that a custodian should disclose wallet architecture, insurance, private-key management, insider-collusion controls and physical security. The captured packet does not independently verify those items for FTX.com. claim.ftx.cutoff.verification-gap source · ftx.cutoff.sbf-house-testimony
Entity perimeter
The strongest quantified control evidence concerns LedgerX LLC d/b/a FTX US Derivatives. Its regulatory submission represented that proposed Rule 7.3 would segregate participant funds and that USD 250 million of unencumbered cash would support the clearinghouse guaranty fund. Management separately described FTX US as a distinct corporate entity. The USD 250 million therefore belongs in an entity-scoped table, not in FTX.com's liquidity. claim.ftx.cutoff.derivatives-controls claim.ftx.cutoff.entity-scope table.ftx.cutoff.entity-scoped-resource source · ftx.cutoff.ftx-us-derivatives-letter source · ftx.cutoff.sbf-house-testimony
Independent commenters also asked whether segregation, conflicts, capitalization, default resources and backstop-provider governance were adequately addressed in the FTX US Derivatives proposal. A CFTC-hosted roundtable concluded that further analysis remained. These are stakeholder concerns, not CFTC findings, and they still concern a different product and legal entity. claim.ftx.cutoff.control-questions source · ftx.cutoff.fia-comment source · ftx.cutoff.cftc-roundtable
Financial reconstruction
CoinDesk reported that a private, possibly partial Alameda document showed USD 14.6 billion of assets and USD 8.0 billion of liabilities at June 30. Reported components included USD 3.66 billion of unlocked FTT, USD 2.16 billion of FTT collateral, USD 292 million of locked FTT liabilities, USD 7.4 billion of loans and USD 3.37 billion of “crypto held.” These are source-reported entries from a leaked, unaudited affiliate document—not audited facts about consolidated FTX and not a liquidity schedule. claim.ftx.cutoff.leaked-alameda table.ftx.cutoff.leaked-alameda-snapshot source · ftx.cutoff.coindesk-alameda
Caroline Ellison responded that the document covered only a subset of corporate entities and asserted that more than USD 10 billion of assets were omitted. That is meaningful disconfirming evidence against treating the leak as complete. It does not identify the omitted assets, their legal owners, liquidity, encumbrances or associated liabilities. The conflict remains disclosed and unresolved at the cutoff. claim.ftx.cutoff.ellison-rebuttal conflict.ftx.cutoff.alameda-completeness source · ftx.cutoff.ellison-response
No deterministic consolidation, net asset value or loss estimate is justified. Customer liabilities, segregated controlled assets, cash by settlement window and related-party balances remain unknown in the captured packet. A target price is also out of scope because there is no complete capitalization, cash-flow reconstruction, market-price input or position mandate. judgment.ftx.cutoff.financial-abstention table.ftx.cutoff.ftxcom-verification-gaps source · ftx.cutoff.coindesk-alameda source · ftx.cutoff.ellison-response source · ftx.cutoff.sbf-house-testimony
Trigger and alternatives
Changpeng Zhao announced that Binance would liquidate its remaining FTT. His approximately USD 2.1 billion figure described Binance's prior exit consideration in cash, BUSD and FTT; it was not a disclosed current FTT position or sale amount. The announcement nevertheless adds a credible concentrated-seller and confidence signal to the already visible affiliate concentration. claim.ftx.cutoff.counterparty-sale source · ftx.cutoff.zhao-liquidation
Maintaining the status quo relies on contract language, an unverified management rebuttal and controls reported for a separate derivatives entity. A verified-custody cap is preferable to status quo but leaves avoidable exposure during the verification interval. Staged reduction preserves optionality: it can be halted if entity-specific proof arrives, and it produces direct evidence through settlement receipts. Its critical execution assumption is that ordinary withdrawals remain available; the contract supports the right but does not prove live performance. assumption.ftx.cutoff.withdrawal-execution source · ftx.cutoff.terms
Required verification and reversal gates
Reverse the reduction only after independent work reconciles FTX.com customer liabilities to legally owned, controlled, segregated and unencumbered assets; verifies cash and stablecoins by settlement window; maps affiliate receivables, payables, collateral and code privileges; and demonstrates normal withdrawals under simultaneous FTT-price and customer-outflow stress. Monitor completed withdrawals, customer-asset coverage, related-party access and executable FTT market depth. Until those gates pass, uncertainty is itself the exposure.
Boundary conditions
Do not infer wrongdoing from vertical integration, FTT ownership or a counterparty sale. Do not treat the leaked Alameda document as consolidated FTX, Ellison's omitted-assets assertion as verified liquidity, the USD 250 million derivatives resource as available to FTX.com, or the historical USD 2.1 billion exit consideration as Binance's sale size. The lesson at the cutoff is narrower: when a custodian's critical balances and affiliate access are not independently verifiable, contractual assurances and group-level branding do not justify unlimited custody exposure.