CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

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

By Daniela Ešnerová

Edited by Charlie Mellor


Updated

Alameda Research logo on smartphone and computer screen
Sam Bankman-Fried has revealed how he used Alameda Research to fund a Robinhood Markets stock purchase – Photo: Shutterstock

Quantitative cryptocurrency trading firm Alameda Research has been identified by Sam Bankman-Fried, the business’s founder, as the funding source behind the purchase of $546m of stock in Robinhood Markets (HOOD).

According to documents filed by Bankman-Fried with the Eastern Caribbean Supreme Court, he and Gary Wang, co-founder of the FTX crypto exchange with Bankman-Fried, borrowed $546m from Alameda.

This was used to capitalise a Bankman-Fried holding company, Emergent Fidelity Technologies, that acquired just over 56.2 million shares in HOOD.

The latest detail shines further light on the business activities of Alameda, which along with FTX and 134 other corporate entities, filed for Chapter 11 voluntary bankruptcy on 11 November 2022.

What is your sentiment on HOOD?

16.66
Bullish
or
Bearish
Vote to see Traders sentiment!

Robinhood Markets (HOOD) share price

Major DeFi investor based in Hong Kong

Alameda Research was founded by Bankman-Fried, known to the crypto world as SBF, in October 2017 and was a major decentralised finance (DeFi) investor. The Hong Kong-headquartered private equity firm has made more than 222 investments, according to Crunchbase.

The collapse of Alameda came after a leaked balance sheet revealed that the company’s books relied heavily on the FTX token (FTT) issued by the crypto exchange FTX.

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 Alameda Research and FTX owed 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.

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 FTT token.

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.

Binance backed out of takeover after due diligence

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.

BCH/USD

514.10 Price
+1.910% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.50

BTC/USD

66,282.40 Price
+2.720% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

XRP/USD

0.54 Price
+2.480% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

DOGE/USD

0.16 Price
+2.580% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

“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.

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. According to Crunchbase, the company made 222 investments in the five years of its existence.

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.”

Markets in this article

HOOD
Robinhood Markets Inc (Extended Hours)
16.66 USD
-0.45 -2.640%

Related topics

Rate this article

Related reading

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.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 610,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading