An evaluation of the FTX and Alameda Research collapse has been printed by the blockchain and crypto analytics agency Nansen and the report notes that the Terra stablecoin collapse, and the liquidity crunch that ensued, doubtless began the domino impact that led to the company’s implosion. The examine from Nansen additional particulars that “FTX and Alameda have had close ties since the very beginning.”
Report Shows Terra LUNA Collapse and Intermingled Relationships May Have Initiated FTX’s and Alameda’s Demise
On Nov. 17, 2022, 5 researchers from the Nansen staff printed a blockchain evaluation and complete take a look at the “The Collapse of Alameda and FTX.” The report notes that FTX and Alameda had “close ties,” and blockchain data verify this truth. FTX’s and Alameda’s rise to the high began with the FTT token launch and the “two of them shared the majority of the total FTT supply which did not really enter into circulation,” Nansen researchers detailed.
FTX and FTT’s meteoric scaling led to Alameda’s swelling stability sheet which “was likely used as collateral by Alameda to borrow against.” Nansen researchers element that if the borrowed funds had been leveraged to make illiquid investments, then “FTT would become a central weakness for Alameda.” Nansen researchers say weaknesses started to present when Terra’s once-stable coin UST depegged and prompted a large liquidity crunch. This led to the collapse of crypto hedge fund Three Arrows Capital (3AC) and crypto lender Celsius.
While it’s not related to Nansen’s report, 3AC co-founder Kyle Davies stated in a latest interview that each FTX and Alameda Research “colluded to trade against clients.” Davies implied that FTX and Alameda had been stop hunting his crypto hedge fund. After the contagion impact from Celsius and 3AC, Nansen’s report says “Alameda would have needed liquidity from a source that would still be willing to give out a loan against their existing collateral.”
Nansen particulars that Alameda transferred $3 billion value of FTT on the FTX change and most of these funds remained on FTX till the collapse. “Evidence of the actual loan from FTX to Alameda is not directly visible on-chain, possibly due to the inherent nature of CEXs which may have obfuscated clear [onchain] traces,” Nansen researchers admit. However, outflows and a Bankman-Fried Reuters interview recommend to Nansen researchers that FTT collateral could have been used to safe loans.
“Based on the data, the total $4b FTT outflows from Alameda to FTX in June and July could possibly have been the provision of parts of the collateral that was used to secure the loans (worth at least $4b) in May / June that was revealed by several people close to Bankman-Fried in a Reuters interview,” Nansen’s examine discloses. The report concludes that the Coindesk stability sheet report “exposed concerns regarding Alameda’s balance sheet” which lastly led to the “back-and-forth battle between the CEOs of Binance and FTX.”
“[The incidents] caused a ripple effect on market participants, Binance owned a large FTT position,” Nansen researchers famous. “From this point on, the intermingled relationship between Alameda and FTX became more troubling, given that customer funds were also in the equation. Alameda was at the stage where survival was its chosen priority, and if one entity collapses, more trouble could start brewing for FTX.” The report concludes:
Given how intertwined these entities had been arrange to function, together with the over-leverage of collateral, our autopsy [onchain] evaluation hints that the eventual collapse of Alameda (and the ensuing impression on FTX) was, maybe, inevitable.
You can learn Nansen’s FTX and Alameda report in its entirety here.
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Image Credits: Shutterstock, Pixabay, Wiki Commons, Editorial picture credit score: Nansen Research, Maurice NORBERT / Shutterstock.com
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