Until very recently, Sam Bankman-Fried (SBF) ruled a cryptocurrency empire comprised of one of the world’s largest crypto exchanges, FTX, and trading firm Alameda Research.
But the empire is now crumbling before the eyes of market watchers. And it was the extent of the interconnected finances between the two crypto firms, revealed last week, that sparked one of the most astonishing stories in the industry.
A leaked balance sheet from Alameda Research show that billions of its collateral is denominated in FTX’s native coin, the ftx token (FTT), sparking investor concerns, a bank run, and ultimately FTX agreeing to a takeover by a rival.
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FTX Token (FTT) in US dollars
Leak revealed FTT-dominated record
Alameda’s finances, according to CoinDeskrevealed that billions of the company’s balance sheet are denominated in FTT – including $3.66 billion in “unlocked FTT”.
The figures have come under intense scrutiny, with commentators raising a number of red flags.
Dylan LeClair underline that the amount of Alameda’s FTT stake is greater than the total market capitalization of the token. He added:
“Most net equity is tied to completely illiquid altcoins. For those unaware, FTT is the token issued by FTX for exchange fee discounts.
“The total market capitalization of FTT is $3.35 billion and the fully diluted market capitalization is $8.8 billion. You couldn’t sell $1 million of this thing without driving the market down significantly.
According to CoinDesk, Alameda Research has $14.6 billion in assets, compared to $8 billion in liabilities.
For assets: $3.66 billion FTT, $2.16 billion “FTT collateral”, $3.37 billion crypto ($292 million SOL, $863 million “locked SOL”), 134 million USD and 2 billion dollars of “equity securities”.
Most net equity is tied to completely illiquid altcoins.
—Dylan LeClair ???? (@DylanLeClair_) November 2, 2022
The head of Alameda tried to calm investors down
Over the weekend, Alameda CEO Caroline Ellison tried to calm investors down and defended the company’s financial strength, saying the leaked document related to “a subset of our corporate entities.”
She added on Twitter“We have over $10 billion in assets that aren’t there.
“The balance sheet details some of our largest long positions; we obviously have hedges that are not listed. Given the tightening of the crypto credit space this year, we have already paid off most of our loans.
But reinsurance failed to appease the markets. On Sunday afternoon, Changpeng ‘CZ’ Zhao, CEO of Binance – FTX’s rival, added fuel to the fire after he tweeted that his company would “liquidate any balance FTT on our books” in light of the balance sheet revelations.
Nervous investors began withdrawing funds from FTX in large numbers, and the exchange stopped processing withdrawal requests on Tuesday, November 8. Shortly after, SBF announcement FTX agreed to a takeover by its rival, Binance.
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