In his first court docket submitting, new FTX CEO and chapter trustee John Ray III revealed yesterday a good better extent of the fraud and chaos behind the collapse.
“By no means in my profession have I seen such a whole failure of company controls and such a whole absence of reliable monetary info as occurred right here,” Ray mentioned within the submitting.
Famend on-chain evaluation agency Nansen has now produced its personal report back to discover the origins of the catastrophe. It says Bankman Fried firms have been carefully linked from the start.
Nansen Findings Uncover The Early Entanglements of FTX and Alameda
It was no secret that Alameda was one of many first, if not the primary, liquidity suppliers on FTX. Nonetheless, how shut the entanglements have been was to stay a secret till just lately.
The connecting hyperlink was the FTT token, which the alternate created. Alameda’s pockets was already interacting with FTX earlier than it had even launched in Could 2019.
[A]half from different CEX addresses, it was the one clearly identifiable counterparty.
Though comparatively low in quantity (~$160k), this strongly means that both Alameda was closely concerned in FTX’s inception or there was no clear separation between Alameda and FTX then – and maybe, even each.
Additionally startling is Nansen’s discovering that Bankman-Fried‘s two firms shared a lot of the full FTT provide that by no means entered circulation.
Nansen’s evaluation discovered that FTX managed 280 million of the full 350 million FTT (~80%), regardless that Bankman-Fried’s firm claimed to personal solely half of all tokens.
The preliminary success and the meteoric rise of FTT’s value from $0.10 to an ATH of $84 within the bull market of 2021 in the end artificially inflated Alameda’s steadiness sheet. This excessive steadiness sheet valuation may then be leveraged by Alameda to acquire loans backed by FTT.
However when the borrowed funds have been used for illiquid investments, FTT grew to become a “key vulnerability” for Alameda. Unable to promote giant quantities of its FTT with out sending the value plummeting, the corporate skilled liquidity shortages.
“This was a Gordian knot for Alameda’s FTT holdings and created an additional co-dependency between Alameda and FTX,” Nansen wrote in his report.
With the collapse of Terra/UST, the Gordian knot grew to become inevitable, as many collectors started to claw again loans following the collapse of 3AC and Celsius. So what was the answer? Extra loans in opposition to FTT as collateral.
Finally, after the collapse of Terra/ UST, Alameda had few choices to repay the recalled loans, so it turned to FTX once more.
Alameda deposited about $4 billion price of FTT tokens on FTX between early June and July, peaking throughout the 3AC collapse within the week of June 12, 2022.
“That is in step with the interview from Reuters with a number of individuals near Bankman-Fried, revealing a $4b mortgage from FTX to Alameda backed by FTT tokens, Robinhood shares, and different asset,” as Nansen hypothesizes.
Final however not least, Binance CEO Changpeng Zhao was the one to deliver down the home of playing cards together with his notorious tweets about promoting all FTT tokens and warning Bankman Fried’s alternate may very well be the following Terra Luna.
At presstime, the Bitcoin value remains to be buying and selling sideways following preliminary FTX shock, awaiting if there are additional contagion results available on the market.