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Rumors about a potential liquidity crisis for the world’s third largest cryptocurrency exchange have turned out to be true. Just one day after confirming that funds are fine and that he has assets backing his clients’ funds, FTX CEO Sam Bankman-Fried (SBF) announced on Tuesday: Binance Shows Intent to Acquire Global Crypto Platform To help the liquidity crisis.
The liquidity crisis came as a surprise to many. Fall of Luna and the Bankruptcy of 3AC.
Even as the crypto community processes the events of the last 24 hours, the focus has now shifted to other entities owned by SBF, most notably Alameda Research, a large principal trading firm. Alameda and FTX Venture capital business merged in August 2022Alameda itself faced a crisis during the Q2 crypto epidemic, prompting speculation that FTX bailed it out.
Lucas Nuzzi, head of crypto analytics firm Coinmetric, said on Sept. 28 that the FTT market cap increased by 124.3%, with 173 million FTX tokens (FTT) more than $4 billion in value has been activated on-chain. Nuzzi noted that a total of $8.6 billion worth of his FTT tokens were moved onto the chain on the same day.
Related: SBF tumbles from Bloomberg’s Billionaires Index after troubles on FTX
Tracking the day’s fund transfers, Nuzzi reportedly unearthed 173 million FTT tokens from 2019 ICO-era contracts, with Alameda Research as the beneficiary of the $4 billion mint.
Alameda Research was the only one to receive 4/41.9 billion USD worth of FTT tokens!
so what? Alameda and FTX have been intrinsically linked since day one, and Alameda apparently was part of the FTX ICO.
But what happened next was interesting…
Lucas Nuzzi (@LucasNuzzi) November 8, 2022
On-chain data confirms that the entire 173 million FTT tokens were transferred from the Alameda Research address to the FTT ERC-20 deployers controlled by FTX.
According to Nuzz’s theory, Alameda went bankrupt along with 3AC and other crypto lenders due to excessive leverage, but survived thanks to funding from FTX. The crypto exchange used his 173 million FTT as collateral granted in September to save Alameda from imploding during the contagion in Q2. Nuzz believes that FTX not only helped him implode Alameda, but subsequently saved 173 million vested FTTs from liquidation.
6/ Remember, FTT ICO contracts are automatically vested.
If FTX imploded Alameda in May, its collapse would have ensured the subsequent liquidation of all FTT tokens granted in September.
It was terrible for FTX, so they had to find a way around this scenario.
Lucas Nuzzi (@LucasNuzzi) November 8, 2022
Alameda’s bailout ultimately proved too expensive for FTX to meet, especially after the FTT sellout sparked by the Binance feud. This ultimately led to FTX going bankrupt and forcing it to go bankrupt. Cointelegraph reached out to FTX for clarification on this matter, but did not receive a response at press time.
