FTX: Customer Balances on Screen, Alameda’s Money to Spend

The FTX CFTC fraud settlement imposed $12.7 billion in restitution and disgorgement obligations on FTX Trading and Alameda over diverted customer assets and undisclosed trading privileges. The court found that the exchange showed customers their balances while its affiliated trading firm could use the assets behind them. For someone working in exchange engineering, treasury or risk, the case reaches into familiar territory: deposit instructions, account permissions and the difference between the balance a customer sees and the money available to withdraw.

The August 7, 2024 court order in the Commodity Futures Trading Commission’s civil action required the companies jointly to satisfy $8.7 billion in restitution and $4 billion in disgorgement through a bankruptcy agreement and plan. The court imposed no civil monetary penalty in that resolution.

The court’s findings describe FTX as a digital-asset derivatives exchange offering futures, options and swaps. Alameda traded and invested in digital assets, provided liquidity on FTX and borrowed from outside lenders. The companies shared employees, systems, accounts and communications channels, and transferred assets between themselves without effective tracking. That combination put the exchange, its customers’ assets and an affiliated trader’s funding needs within the same operation.

Customer Safeguards on Paper, Alameda Accounts in Practice

FTX promised that customers retained ownership of their digital assets and could control them. Its terms said those assets could not be loaned to FTX Trading. The court’s order against FTX and Alameda found that Alameda nevertheless used customer deposits for its own trading, investments and borrowing activities without customers’ authorization.

When the platform launched, FTX had not established bank accounts to accept customer deposits. Customers depositing ordinary currency received instructions to wire it to Alameda-controlled accounts, including accounts in the name of North Dimension, an Alameda subsidiary. The Commission’s original complaint described how the exchange made that arrangement look to the customer:

The court’s later order found that deposits often remained in Alameda bank accounts after customers received their ledger credits. Even after FTX opened its own customer-benefit accounts, some customer deposits continued to reach Alameda. Alameda could also withdraw digital assets from FTX’s online wallets. Customers were not told about that access.

This is the distinction at the center of customer-fund misappropriation: the customer account can keep showing a balance after someone else has gained access to the underlying money. We see a particularly sharp contradiction at FTX. Customer assets helped pay for marketing that sold customers on the safety of leaving assets there. The order identifies a Super Bowl commercial and a Miami stadium sponsorship among the uses of commingled funds.

The Risk Engine Had an Exception for Alameda

Alameda could borrow and withdraw assets while its account was negative, and FTX’s automatic liquidation process did not apply to it. The court identified an “Allow Negative” flag and a borrowing limit set at $65 billion. Together, those permissions gave the affiliated trader access that customers did not see advertised.

FTX promoted its automatic liquidation engine as a risk control. Such a system closes positions when a customer’s margin becomes inadequate. The complaint alleged that Alameda’s exemption was hard-coded and operated under any conditions. The court’s order confirms the exemption. The safety system had an exception for the business reaching into customer assets.

There was also an alleged advantage over other traders. According to the complaint, Alameda could bypass parts of FTX’s order-routing system and reach the trading interface several milliseconds ahead of other customers using the API. The alleged preference concerned execution speed as well as borrowing and withdrawals.

Customer Assets Paid Alameda’s Debts

When lenders called Alameda’s loans during May and June 2022, Alameda increased its use of FTX customer assets to meet those obligations. The court’s order describes withdrawals worth several billion dollars. Money deposited with an exchange became funding for its affiliated trader’s outside creditors.

The balance sheet helped sustain that dependence. Alameda held large quantities of FTT, the token FTX issued, and used its token holdings to support borrowing. The court found that Alameda valued those holdings at market prices without an appropriate discount for what selling such a large position would do to the price. The quoted price of a token and the money available from selling a concentrated holding were different things.

By roughly midyear, FTX’s internal ledgers showed approximately $8 billion in Alameda’s dollar liabilities. At the founder’s direction, executives moved those liabilities into an account that was no longer readily identifiable as Alameda’s. The order gives the system label as “ftx-fiat-old.” The account retained the negative-balance and liquidation exceptions.

The debt changed labels. The customer assets did not come back with the change.

By late November 7, 2022, FTX lacked enough assets to meet customer withdrawals. The order records that executives understood internally that customer assets were unavailable because they had been misappropriated, while public statements continued to present the shortfall as a liquidity problem. FTX halted withdrawals the following day.

An earlier customer-money case shows the same funding pressure in a different business. The MF Global company order addressed customer money used during a liquidity crisis for proprietary operations, affiliates and other obligations. In both cases, the firm’s need for cash reached into assets it held for customers. That is a recurring pattern across CFTC customer-asset cases, and a reason transfer approvals matter alongside customer statements.

The Founder’s Criminal Verdict

The Justice Department’s account of the criminal case records the founder’s November 2, 2023 conviction on seven counts, including conspiracy to commit commodities fraud. The payment obligations against FTX Trading and Alameda came from the separate civil action against the companies.

Can CFTC Prosecute Criminal Violations?

No. The Commodity Futures Trading Commission brings civil and administrative enforcement actions. The Justice Department brings criminal prosecutions, including the founder’s case.

The Engineer’s Code, Admissions and Property Purchase

FTX’s head of engineering faced a separate Commission action over his role in the customer-money scheme. The agency’s complaint alleged that he created the negative-balance functionality and a related ability to withdraw beyond borrowing limits, and participated in moving Alameda’s liabilities into the concealed account.

The complaint also alleged that Alameda could sell customers digital assets it did not own. The customer-facing result was another balance unsupported by assets:

His criminal plea supplies his own account of what he knew. In the plea transcript attached to his later civil order, he admitted understanding by mid-2022 that Alameda was borrowing money belonging to FTX customers without their knowledge or consent. He participated in tracking the amount and learned by early September that Alameda could not repay it. He nevertheless agreed to expenditures that effectively came from customer money. He also admitted making FTX’s revenue appear higher and providing misleading information to auditors.

The civil court’s March 31, 2026 supplemental order set disgorgement at $3.7 million, tied to real estate he bought in October 2022. The order says he knew, or recklessly disregarded, that the funds from his FTX account consisted at least partly of misappropriated customer assets.

The FTX CFTC Bankruptcy Restitution Payment Route

The companies’ payment obligations run through a court-approved settlement agreement and bankruptcy plan. FTX Trading and Alameda share responsibility for the amounts ordered.

Restitution covers losses caused by the violations. Disgorgement requires the companies to give up gains from them. Payments under the plan for FTX.com and FTX.US customers and Alameda lenders count toward restitution. Payments on the Commission’s bankruptcy claim for disgorgement count toward that separate obligation.

Customer Repayment and Whistleblower Awards

A customer’s recovery and a whistleblower’s reward serve different purposes. Under the CFTC whistleblower program, qualifying whistleblowers collectively can receive 10% to 30% of sanctions actually collected in the covered action. That award range concerns information that helps enforcement.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. That is separate from the Commission’s FTX action.

You Know Who Could Move the Money

People working in engineering, treasury, accounting or risk may know who authorized an exception, how a liability moved, or why a customer balance stopped matching available assets. If your work showed you the difference between a customer’s balance and the assets behind it, speak to one of our Whistleblower Experts about who could move the money. We connect the money, the software and the decisions to build your strongest customer-asset whistleblower case, and bring in CFTC whistleblower lawyers who know exchange custody cases. We stay beside you through the process.