Black Box: The Sam Bankman-Fried trade company was great risks for FTX

The collapse of Sam Bankman-Frieds 32-billion dollar cryptocurrency exchange made the cryptoma markets and stunned this week, but at the center of the crisis there was a much less well-known but risky company: Alameda Research.

The Digital Asset Trading Shop from Sam Bankman-Fried was opened in 2017, but around $ 600 to $ 1 billion was traded every day within two years after its foundation. Much of his financing was based on borrowing, with other crypto tokens, according to industry participants, were often used to complete bets with high leverage.

The company, which is managed by a small squad of managers and ultimately controlled by Bankman-Fried, had close connections to FTX, a extensive crypto trading place that made it possible to bet with complex derivatives at the price of digital tokens such as Bitcoin. Bankman-Fried founded FTX for about a year and a half to Alameda. This week, Alameda owed $ 10 billion of the stock exchange.

"The turning point is not FTX, but Alameda and the credit risk received," said Rosario Ingarrgiola, founder and managing director of Bosonic, a crypto processing service.

Alameda finally triggered the fire, which finally devoured FTX.

A report by the Crypto publication Coindesk of November 2, in which it was claimed that $ 5.8 billion of $ 14.6 billion of assets in Alameda's balance of FTX, known as FTT, was known as FTT, depth concern about the relationship between the two nominally separate companies. The report also says that a large part of the FTT of Alameda was used as security for loans to an unknown party.

"That alone should raise the alarm, but the greater question is: Who has accepted financial transaction taxes worth billions of dollars as security?" asked Clara Medalie, analyst at Kaiko, a crypto market research provider.

History deepened the mistrust of the market about Alameda's health and whether it was on serious loss of market that had suffered in the cryptic crypt of spring. The snapshot of the balance sheet included the period in which many large crypto names went bankrupt. Insolvency applications for one of them, Voyager Digital, revealed that Alameda owed $ 376 million to the lender.

In a first sign of the liquidity problems with which Banksman-Fried's empire is faced, Alameda, according to the report, rated its FTT stocks with almost 200 percent of the current market capitalization of FTT of $ 3.1 billion.

Caroline Ellison, managing director of Alameda, said on Sunday that only one of the company's company units is reflected and the company has assets of more than $ 10 billion that were not reflected in the numbers.

But the market was not convinced. A little more than an hour later, on Sunday, Changpeng Zhao, Managing Director of the competing Stock Exchange Binance, said that he would repel his FTT-TOKEN worth at least $ 580 million as a response to "latest revelations" and led the example of Luna, the collapsed cryptocurrency overnight in May, which led to heavy turbulence on the market.

FTX customers also hurried to the outputs: The stock exchange was faced with a record of around $ 5 billion on Sunday, and Bankman-Fried admitted this week that it had only $ 4 billion in easy-to-go US dollar assets to cover it. Bankman-Fried attributed the misjudgment of the leverage of its customers to a "poor internal labeling of bank-related accounts".

On Monday, when FTX was faced with massive withdrawals, Alameda tried to sell the most liquid -available assets. A snapshot of Alameda's balance sheet, which the Financial Times was presented, showed that the company intended to liquidate shares in the retail broker Robinhood and Krypto token and to redeem a loan to the EU branch of FTX. Despite its high liabilities compared to FTX, only USD 1.8 billion were slightly available.

On Tuesday, customers reported that they had difficulty lifting their funds, which only increased the market fear. "FTX is neither a trading company nor a lender, so you should theoretically have access to the equivalent of 100 percent of your customers' funds," said Medalie.

Jean-Marie Mogetti, CEO of the asset manager Coinhares, who invests $ 30.3 million in FTX, said that Bankman-Fried's trading center is "no stock exchange, it is much more comprehensive".

"Everything is integrated in this complicated way, which creates this black box," he added.

At the same time, owners of FTT-TOKEN also sold strongly, which worsened the Position of Alameda. On Tuesday, according to the data from Kaiko, a record amount of 309 million FTT was traded, which corresponds to more than 1 billion USD, which deals with the sale of other assets by FTX to defend coins.

But the price of FTT still broke up by 80 percent on Monday and Tuesday. The loans secured against the financial transaction tax were under water and created a vicious circle that Banksman-Fried was difficult to break through.

In search of a lifeline, he turned to his arch -rival - Zhao at Binance - who agreed to buy the stock exchange on Tuesday. FTX "asked for our help", Zhao wrote on Twitter and added: "There is a significant liquidity crisis."

But after less than 48 hours of diligence, Binance went away on Wednesday. Zhao referred to concerns about the business practices of FTX and the investigation by the supervisory authorities.

After his best bet was gone, Bankman-Fried searched for an alternative and asked investors by up to $ 8 billion to stuff a hole in the FTX balance. He turned to the crypto exchanges OKX, the StableCoin operator Tether and Justin Sun, the founder of the crypto token Tron, to get a money injection-but none came about.

investors who had supported him as willingly as Sequoia Capital and Softbank at the beginning of the year, wrote down the investments to zero.

Bankman-Fried went to Twitter on Thursday to apologize for the crisis that devoured his crypto empire. "I'm sorry. This is the biggest. I screwed it up and should have done it better," he said, adding that Alameda would close. In one last attempt he tried to assure the market that FTX Solvent was, but not liquid and that the users of his US arm "go well".

It was too late. FTX and Alameda had registered bankruptcy within 24 hours, and Zhao predicted that the effects would plunge the industry into a crisis that resembled the crash from 2008. The US supervisory authorities are examining the FTX loan products and the management of customer money, said a person who is familiar with it. For many, the cause was simple.

"All rooted in a lack of transparency and conflicts of interest," said Anish Puaar, head of the European stock market structure at the Market Maker. "A large stock exchange like the London Stock Exchange or the German stock exchange has never been so closely connected to a market maker."