Alameda Research Was Frontrunning FTX Token Listings: Report
Fallen FTX Founder Cheated to Make More Money on His Platform
Hey Guys,
Just how SBF and FTX did wrong is coming more to light. Why are we not surprised?
It’s really bizarre to see this happening in crypto after such a history of fraud in crypto. Crypto compliance firm Argus reports that Alameda, which was supposed to be distinct from Sam Bankman-Fried’s FTX, amassed tokens before their listings on the exchange were made public.
So where do we start?
Fun in the Bahamas of Crypto
As the implosion of crypto exchange FTX continues, new claims about the “gang of kids” responsible for the $US32 billion disaster are emerging — with allegations of amphetamine use and a freewheeling, 10-person “sexual polycule” inside the luxury Bahamas penthouse that served as the doomed operation’s headquarters.
Alameda Research used prior knowledge of tokens that were scheduled to be listed on FTX to buy them ahead of the public announcements and then sold them for a profit, according to an analysis from crypto compliance firm Argus.
Alameda’s success spurred the launch of crypto exchange FTX in the spring of 2019. Though it used cheating to get there.
Between the start of 2021 and March of this year, Alameda held $60 million worth of 18 different tokens that were eventually listed on FTX. The analysis was first mentioned in a report on Monday from The Wall Street Journal.
This does not play well on the future of the people who worked at Alameda and not just SBF. It’s clear their behavior was systemic without proper risk-mitigation or any oversight at all.
Some of us may have been tempted to give “white knight” uncle Sam the benefit of the doubt.
Samuel Bankman-Fried, also known by his initials SBF, is an American entrepreneur, investor and former billionaire. So they didn’t just use their token as collateral. Their behavior was much more deceptive.
Bankman-Fried maintained that the two companies were separate entities, but the bank run that forced FTX's hand on suspending withdrawals last week, and ultimately filing for bankruptcy, stemmed from the fact that a large portion of Alameda's balance sheet was comprised of FTT, the FTX exchange token.
As crypto prices tanked this year, Bankman-Fried boasted that he and his enterprise were immune.
Not so immune Sam, it turns out.
So Much Transparency, Fraud and Tokenomics of Crooks
Former OpenSea product manager Nate Chastain was the first ever digital-asset trader charged with an insider-trading scheme, according to the Department of Justice. But not the last!
According to Decrypt, in April, 2022, Crypto Twitter personality and podcast host Cobie flagged an Ethereum wallet that purchased $400,000 worth of tokens right before a public blog post announced that they were being considered for listing on Coinbase. Two weeks later, Coinbase CEO Brian Armstrong announced in a blog post that the company would no longer identify assets it was considering listing.
The truth of what Alameda was doing will be slow and painful to come out for the future trust in Crypto. That Binance caused their demise is even more problematic since SBF was a big democratic donor and lobbyist.
The 18 Horsemen of Alameda Research
So the 18 assets that Alameda Research appears to have been frontrunning ahead of their listing on FTX include the BitDAO, Eden Network, Sandbox, LooksRare and Immutable X, crypto compliance firm Argus told Decrypt on Tuesday.
Fast forward a few weeks and $FTT is now worth $1.69, according to coinmarketcap.com. This means Billions of losses.
We Got Played
The scandal has shocked the crypto players who giddily celebrated Bankman-Fried as the J.P. Morgan of their times and left them grasping for parallels.
Alameda borrowed money to invest in failing digital asset firms this spring and summer to keep the industry afloat, then reportedly siphoned off FTX customers’ deposits to stave off margin calls and meet immediate debt obligations. You don’t say?
As Alameda’s influence spreads and connections emerge, so have concerns over potential conflicts of interests. Honestly Tweets don’t do this justice!
Between the start of 2021 and March of this year, Alameda held $60 million worth of 18 different tokens that were eventually listed on FTX.
Bad leverage eh?
“What we see is they’ve basically almost always in the month leading up to it bought into a position that they previously didn’t,” Argus co-founder Omar Amjad, told the WSJ. “It’s quite clear there’s something in the market telling them they should be buying things that they previously hadn’t.”
Binance by telegraphing that they were selling all of their FTT, basically collapsed the fraud and their rising competitor, all in a week’s worth of the crypto brotherhood.
And CZ now boasts about it:
It’s honestly sad to behold, even as an accountability journalist interested in the ponzi-scheme of crypto and how Web 3 is evolving.
Crypto’s Version of Insider-Trading
Sam Bankman-Fried used an old trick to make more money on his crypto exchange FTX, according to the Wall Street Journal.
The practice is akin to insider trading. How bad is this? It’s bad.
Coinbase and FTX, those centralized crypto platforms.
In July, the Justice Department charged Ishan Wahi, a former product manager at Coinbase, with conspiracy to commit wire fraud. The same day, the U.S. Securities and Exchange Commission also filed charges against Wahi, saying that he had shared unpublished listing announcements with his brother, Nikhil Wahi and a friend, Sameer Ramani.
If the allegations against Alameda Research prove to be true, it will mean the company was frontrunning exchange listings on a bigger scale than either the ex-OpenSea or ex-Coinbase managers who’ve already been charged.
Blockchain data from Argus, an analytics firm, showed that even though FTX said it would list the tokens first on its exchange so that investors, ranging from retail to institutional ones such as hedge funds, could purchase them, it was not true.
The Kids Are Not Okay
Young people in the get-rich fast schemes of crypto don’t seem to have a moral compass and seem to take risks as if they think they can get away with it.
SMF is truly a mastermind of moving fast and breaking things.
Alameda, FTX and a host of subsidiaries Bankman-Fried founded have filed for bankruptcy protection in Delaware. He’s stepped down from his leadership roles and lost 94% of his personal wealth in a single day.
But his former girlfriend clearly was not very grounded in integrity here.
But honestly in ten years, are we even going to remember who SBF was?
I am not amused. I’m used to pointless products and tokens that brutally try to leverage ideology, but this fraud is next-level.
It was a steep fall from hero to villain. But there were a lot of signs. Bankman-Fried told CNBC in September that one of his fundamental principles when it comes to playing the markets is working with incomplete information.
In crypto, the kids are still making it up as they go along. The Bitcoin cult since 2009, get rich fast and FOMO culture.
The Problem of Crypto Contagion
With Alameda too many people will lose money and lose big. It could easily spread to other aspects of crypto and trust in tokens in general.
After FTX collapse, crypto investors need to rethink how they hold assets
FTX was recently valued at as much as $32 billion. It’s one thing to be worth zero but the damage it will cause will have ripples for years. Crypto already had a poor reputation for trust and safety before this meltdown.
SBF and FTX will be a good movie at least one day.
However it only makes me trust the likes of Coinbase, crypto.com and blockchain.com even less, among others. The entire point of decentralization was not to have middle-men.
Binance caused this crash and its a monopoly in the space that is truly too centralized.
Thanks for reading!