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What is Alameda Research? Sam Bankman-Fried’s secretive proprietary trading firm is major DeFi investor

By Daniela Ešnerová


Updated

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FTT/USD
FTT/USD
1.4208 USD
0.0279 +2.030%
BTC/USD
Bitcoin / USD
17062.35 USD
46.3 +0.270%

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Alameda Research logo on smartphone and computer screen
Alameda-backed firm Fordefi raised $18m for a DeFi institutional wallet in early November – Photo: Shutterstock

As the world’s second-largest crypto exchange, FTX – valued at $32bn just a few months ago – filed for bankruptcy, all eyes turned to FTX’s sister company, Alameda Research, whose balance-sheet shortfall may have speeded up the crypto empire’s downfall.

On Friday 11 November 2022, FTX, Alameda, and 134 corporate entities filed for Chapter 11 voluntary bankruptcy. This came nine days after Alameda’s leaked balance sheet revealed that the company’s books relied heavily on a cryptocurrency issued by FTX.

Alameda Research, a quantitative cryptocurrency trading firm, was founded by Sam Bankman-Fried, known to the crypto world as SBF, in October 2017 and is a major decentralised finance (DeFi) investor. The Hong Kong-headquartered private equity firm has made more than 180 investments, according to Crunchbase.

On Monday 28 November, crypto lender BlockFi filed for bankruptcy. On the first day of its court hearing, it was revealed by attorney Joshua Sussberg that FTX and Alameda Research owe BlockFi around $1bn – approximately $671m on a defaulted loan to Alameda, and more than $355m in frozen funds on the FTX exchange.

On 2 December 2022, the Financial Times reported that Alameda stepped in for FTX last year to the tune of $1bn, after a customer incident on the platform – further evidence of how the companies did not act separately. 

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FTX token (FTT) to US dollar

Crypto empire melted

Alameda’s relationship with SBF’s crypto exchange FTX has been at the centre of scrutiny after CoinDesk published Alameda’s balance sheet, revealing that 40% of the company’s assets were denominated in the FTX token (FTT).

The revelation that Alameda largely depended on its sister firm’s token rather than fiat currency or third-party cryptocurrencies sparked large numbers of investors to flee FTX and FTT and the company was unable to keep up with client withdrawal requests.

Bitcoin (BTC) to US dollar

Rival cryptocurrency platform Binance had originally agreed to help FTX with what it called a “liquidity crunch” and take over the embattled business. However, Binance later back-tracked on the non-binding deal.

“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX,” said Binance in a tweet on 9 November. 

ETH/USD

1,266.05 Price
+0.270% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 5.00

BTC/USD

17,062.35 Price
+0.270% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 60.00

DOGE/USD

0.10 Price
-0.080% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.0012855

XRP/USD

0.38 Price
-1.700% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.00310

Two days later, FTX and Alameda filed for Chapter 11 voluntary bankruptcy in Delaware and FTX founder and CEO Sam Bankman-Fried resigned from his role. The filing document also revealed that FTX and Alameda’s liabilities each ranged between $10bn to $50bn.

Alameda’s DeFi investment  

Alameda was a big DeFi investor. The company made over 180 investments in the five years of its existence, according to Crunchbase

These include several capital injections for firms working on DeFi solutions. On 8 November, fintech and software company Fordefi announced it had raised $18m for the launch of an institutional DeFi wallet from Alameda and other investors.

“DeFi transactions are much more complex than simple asset transfers, and that’s the key to DeFi’s exciting new opportunities,” Fordefi’s co-founder Dima Kogan commented.

“Unfortunately, this complexity also brings with it many new security risks. Fordefi enables institutions to interact with DeFi applications with increased operational efficiency and security through in-depth visibility into each transaction and the ability to set the right controls.”

Tokens of Alameda-backed DeFi projects stuck on FTX

But other Alameda DeFi investee projects have felt the pain of their backer’s troubles.

Following Alameda’s bankruptcy, DeFi projects Oxygen and Maps.me, which had received tens of millions of dollars from Alameda last year, now have more than 95% of their token supply stuck on the defunct FTX platform.

“Whilst FTX Group did not hold any equity in the MAPS or Oxygen businesses, it did hold a significant proportion of MAPS/Oxy tokens,” the projects said on 15 November 2022.

“It also acted as custodian for over 95% of the overall supply of our ecosystem tokens – both locked and unlocked.”

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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