In the first half of November, when the implosion of the FTX crypto exchange occurred, Alameda Research withdrew almost all of its funds from the FTX.US portal.
This was revealed a few days ago by the on-chain analytics firm Arkham.
After November 6th, Alameda only withdrew USD-stable tokens, Wrapped BTC or Ether from FTX US.
Of the $204M withdrawn:
$38.06M was in BTC (18.7%)
$49.39M was in ETH (24.2%)
$116.52M was in USD-denominated stables (57.1%) pic.twitter.com/lKRttdkPsZ
— Arkham | Crypto Intelligence (@ArkhamIntel) November 25, 2022
In total, Alameda Research reportedly withdrew about $204 million.
The implosion of the FTX crypto exchange
The chronology of FTX’s implosion is well described by the trend in the crypto markets of the price of its FTT token.
Until 5 November there were no signs of collapse, and the price was around $25.5.
The first signs began to occur on 6 November, when the price began to fall due to rumors of possible insolvency, until it reached $22 on 7 November.
According to Arkham’s disclosure, Alameda Research was probably aware of the ongoing problems, so much so that by that time it had already withdrawn substantial funds held on FTX.US wallets.
And yet in those very days, CEO Caroline Ellison responded publicly to the CEO of Binance saying that they were ready to buy back all FTT tokens at $22.
The next day, 8 November, FTX began having problems with withdrawals, which were then suspended, and the price of FTT suddenly collapsed to just over $4. The next day FTX publicly admitted that it had suspended withdrawals indefinitely, and the price collapsed again to $2. Currently, the FTT token is worth about $1.3.
The Alameda withdrawals noted by Arkham show that most likely before the implosion began the management team had already realized that something was wrong, or at least that the risks had become significant.
Alameda Research is a company also founded by Sam Bankman-Fried (SBF), i.e., the co-founder and CEO of FTX, only two years earlier.
Indeed, it was created in 2017 as a trading company, and then over time, it started to get involved in investments as well. So it was the company in the group headed by SBF that was supposed to be in charge of generating profits through speculation and investment.
The relationship with FTX was very close, not only because of the fact that they shared the same founder, but also and primarily because there was close business cooperation between the two companies, as evidenced by the many large financial transactions that took place between them.
Thus it is absolutely no surprise that Alameda kept more than $200 million in cryptocurrencies and tokens in FTX’s wallets.
What is surprising, however, is the fact that he withdrew them in the very days of the collapse.
Moreover, it is also worth noting that instead, in the following days, FTX’s wallets were emptied by an alleged hack that took another $600 million.
The destination of the withdrawn funds
Arkham also discovered where the 204 million withdrawn from Alameda was sent.
The BTC were actually withdrawn as WBTC (Wrapped Bitcoin) and sent to the company’s WBTC merchant wallet.
Of the ETH withdrawn, much of it was sent to FTX. com, which is the group’s international exchange, while about a quarter was sent to a trading wallet.
The vast majority of the withdrawn stablecoins, totaling about 106 million, were also sent to FTX.com, probably with the aim of helping the international exchange cope with the possible explosion of withdrawal requests.
It is worth mentioning that the insolvency problem was specifically with their international exchange, and not the one for the US market FTX.US.
Thus, Alameda withdrew 204 million from FTX.com, and of that more than half (142 million) sent to FTX.com.
It is worth noting that 10 million in USDT was sent to Binance instead. At the time, Binance was still a partner of FTX.
Authorities’ investigation into the bankruptcy of crypto exchange FTX
Meanwhile, the investigation by Bahamian authorities continues.
In fact, both FTX and Alameda Research were headquartered in the Bahamas, so the authorities are handling the bankruptcy.
In charge of the case is Attorney General Ryan Pinder, who also rejected blame for the affair attributed to his country.
The main government agency handling the case is the Bahamas Securities Commission (BSC), and the case is one of the largest bankruptcy cases to have occurred in the Bahamas.
Moreover, Pinder also cited a news article from 2 November that was the first to speculate on the possible insolvency of FTX, due in particular to the unscrupulous loans taken out by Alameda using FTT tokens as collateral.
However, Alameda Research itself does not fall under the jurisdiction of the Bahamas, since it does not have a registered office in the country, even though it will have to answer to local authorities if it committed wrongdoing in the Bahamas. FTX also had its registered office in the country, in addition to its operational headquarters.
According to Pinder, the investigation is still in the early stages, and it is a very complex investigation. So it may take some time before conclusions are reached.
In such a scenario it is not surprising that, as James Farfalla reveals, sentiment in the crypto markets is still negative.
Indeed, over the past week, investment products in digital assets have seen outflows totaling $23 million, with outflows from long positions predominating. Stocks of blockchain companies also saw outflows of $13 million.
The implosion of FTX has wiped out any hope of an uptick in the crypto markets in the short term, although in the medium to long term some optimism is still around.