Alameda Coverage of $1 Billion Loss for FTX 2021 (Report)

FTX’s sister trading desk, Alameda Research, bailed out the exchange before it suffered a $1 billion trading loss in early 2021.

The news comes amid claims by former FTX CEO Sam Bankman-Fried that FTX and Alameda were independently run companies.

  • as such mentioned FTX suffered huge losses after a client’s leveraged trade in a mysterious crypto token went south, according to the Financial Times on Friday, people familiar with the matter said. Meanwhile, “barriers” designed to protect the exchange from losses on bad trades failed to protect FTX.
  • A common risk management measure companies use when lending money is to collect collateral from the borrower up front. If the loan-to-value to the borrower drops to a certain level, the lender clears the loan and sells the customers’ assets on its own account to cover its costs.
  • The token, called MobileCoin, skyrocketed from $6 to $70 in April 2021, but crashed just as quickly shortly thereafter. At the time, a trader was borrowing against the currency with an unusually large position, and Alameda had to step in and help cover it. The trading desk lost hundreds of millions of dollars in the process.
  • Additional blockchain evidence from Nansen also indicates that Alameda acted as a lender of last resort to FTX when cash was tight.
  • The event indicates deep ties between Alameda and FTX, the two companies founded by Sam Bankman Fried, despite the former CEO claiming he had no knowledge of what was going on at Alameda.
  • Sam Bankman-Fried explained during a an interview Last month, Alameda himself had a multi-billion dollar leveraged position open with FTX, before going bankrupt.
  • Although the position was collateralized by the FTT token, the FTT market was too illiquid and fell too quickly for FTX to liquidate the position and thus remain solvent.

Alameda Post Covering $1 Billion Loss for FTX 2021 (Report) appeared first on CryptoPotato.

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