Written by: An employee who claimed to have joined FTX two days before the collapse

Translated by: Yobo

On the evening of November 8, I landed in Hong Kong. At that time, I had read the questioning voices about Alameda's balance sheet on Twitter. The report by Coindesk further exacerbated the market's concerns. Caroline, CEO of Alameda, said that this balance sheet did not fully cover all of Alameda's assets. Although Binance CEO CZ announced shortly afterwards that he would sell his FTT tokens worth about $500 million. But Caroline responded that Alameda would be able to absorb the FTT selling pressure in the market and gave a "hard bottom" of $22 when the FTT market price was $25, and this was just the beginning of the story.

When I first started working, my Alameda colleague who guided me on board assured me of the solvency of Alameda and FTX, and even laughed at those who thought that Alameda and FTX were insolvent. On my first day of work, I entered the office at 11 a.m. There were about two-thirds of FTX employees and one-third of Alameda employees on this floor. When I stepped into the office, FTT had fallen below the "hard bottom" of $22 and had fallen to $17.

There were some traders in the office whose job was to process user withdrawals by selling popular assets and injecting funds into FTX, but they did not do anything at that moment. At Caroline’s instruction, traders placed a buy order for one million FTTs (worth $140 million) at $14 to prevent the price from falling further. This is because once the price falls below $14, Genesis and other lenders will most likely demand the return of their loans to Alameda. Once this happens, if Alameda cannot repay the funds in time, Alameda will face liquidation, which will be even more unacceptable.

During my onboarding process, I was watching what they were doing, and the "battle" lasted for about 15 hours. Alameda was looking for any penny it could find to support the price of FTT and inject capital into FTX, but during this period, some borrowers of Alameda began to ask for the loan back. At that moment, Caroline needed to make a choice between FTX and the lender, deciding which party should be given priority to the money she found.

As time went on, the traders gradually realized the seriousness of the situation, and a sense of urgency and desperation quickly spread throughout the office. Because FTX's withdrawals were accelerating, the liquidity available for cashing out had almost dried up. Although Caroline and other traders still seemed to believe that Alameda had enough money to pay FTX users' withdrawals, it was clear that their confidence was also declining. It was an extremely difficult battle, as Alameda could only barely keep up with FTX's retreat until SBF posted the news on Twitter that shocked the entire industry - he was in talks with Binance about the other party's acquisition of FTX.

The smoke on the battlefield seemed to dissipate in an instant. Everyone in the office except Caroline was obviously frightened. Then there was a brief surprise, and then the temperature in the office seemed to condense again. Everyone was silent for a while, but everyone knew that this acquisition meant that FTX really had problems, and that was why SBF took such an extreme self-rescue plan.

The people around me burst into tears, because even I, who had just joined the company for one day, could see that the company’s future no longer existed. Because SBF would only make this decision if 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 it was dead silent. Everyone was really still doing what they were doing before, trying to find money and prioritize the funding gap of Alameda's borrowers. After that, I left the office and went home to sleep, and didn't return to the office until about 2 o'clock the next afternoon.

On my second day, I felt like I was walking into a dead office. Most of the FTX employees didn’t come, and even those who came were not working, just chatting or making phone calls. Most of the Alameda team was there, and they were still working on the same work as the night before. I wasn’t assigned much work until 11 o’clock that night, when we had a full-staff meeting.

At the all-staff meeting, Caroline told us the truth. More than a year ago, FTX began to spend lavishly. Various investment shell companies were set up under the name of FTX or Alameda to invest in various companies or illiquid assets, and in the process suffered considerable financial losses. For example, during this period, FTX spent $1 billion to acquire a bankrupt crypto mining company, and Alameda spent $1 billion to $2 billion to acquire FTX shares owned by Binance. In addition, FTX has purchased luxury apartments in the Bahamas and is building an even more luxurious office in the shape of the letter F. The investment in sports sponsorship, endorsements and advertising is also a very large amount.

However, until this time, FTX's user funds were safe. The reason for the subsequent crisis was mainly because FTX's funds and FTT were used as collateral when Alameda took out a loan. The reason why Alameda was able to lend so much money to FTX was because they had a lot of loans in addition to their own funds. After all, at that stage, it was very easy for Alameda to get a loan, and the huge hole in the balance sheet in the end also came from this.

Some people say that Alameda suffered huge losses in the Luna explosion, which is actually inaccurate. In fact, when the crisis occurred, Alameda's position in LUNA was even net short, so they did not lose money. It was just that the crisis led to the default of a number of institutions represented by 3AC, and Alameda suffered certain losses because of the loans it issued to these defaulting companies.

At this point, SBF could only choose between two options: either let Alameda be liquidated or embezzle user assets from FTX to ensure Alameda's survival. SBF chose the latter and officially flipped the switch of this time bomb.

Not many people in the team know how much user funds SBF has misappropriated to save Alameda, but Caroline admitted that FTX and Alameda may be liquidated, and revealed to us the new progress that Binance has given up the acquisition of FTX, citing that the hole in the balance sheet is too big to fill. At this point, everyone has realized a cruel reality, that is, everyone's funds on FTX and FTX's equity have become worthless.

Most of the salaries of Alameda and FTX employees will be transferred directly to the FTX account, and team members will also have the opportunity to receive FTX equity incentives, which was once a benefit that everyone in the team yearned for. When the crisis occurred, neither SBF nor Caroline warned the team members, which caused most people to lose all the wealth they had accumulated in the past few years of work, and some even lost all their savings. An FTX employee I talked to cried because she lost the down payment for her house and car that she had deposited in the exchange account.

Most of the Alameda and FTX employees have accepted their losses but now have to worry about more legal issues they may face. Most are trying to find lawyers to defend themselves as there is a high chance they will be sued and subpoenaed and have to testify before the SEC or CTFC. Most of the innocent FTX/Alameda employees are also worried about their personal safety as their faces have been made public and the office address in the Bahamas has been exposed.

Caroline gave Alameda employees the option to continue working in the coming weeks and continue to liquidate funds paid to FTX, but most people I spoke to declined this option and we all booked the earliest flights out of Hong Kong.

I feel bad for myself too, as I'm just starting out and I'm job hunting again, but that's nothing compared to what the FTX and Alameda employees are feeling. The world will think Alameda just gambled away people's money, but the reality is that day-to-day trading was quite profitable, and Alameda employees were making +EV decisions. Caroline said she won't say anything publicly about this, which means the world won't know that most of FTX/Alameda don't know what happened, only SBF, Caroline, Gary, and a few others took their money. I hope that in the next few weeks the real truth will come out to absolve the employees of guilt - they lost more than anyone, and it would be terrible if the world hated them for their pain as well.

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

【Disclaimer】The market is risky, so be cautious when investing. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investing based on this information is at your own risk.