FTX Trading Ltd. sent shockwaves throughout the crypto space on November 11th, 2022 when it filed for Chapter 11 bankruptcy in Delaware.
The news came after a couple of days of turmoil and speculation that had indicated that trouble was ahead for the crypto exchange and it could eventually become insolvent.
The bankruptcy filing and the information pertaining to Alameda Research, the quantitative crypto trading firm of Sam Bankman-Fried, provided some for details about the situation.
In addition, crypto proponents have also asked why FTX was permitted to fly under the radar by US regulators.
The revelations
Last Friday, the FTX employees and the general public were informed together that FTX Trading Ltd. had filed for bankruptcy protection in the US state of Delaware.
According to the filing, the company has over 100,000 creditors and its estimated liabilities are somewhere between $10 billion and $50 billion.
John J. Ray III, the new chief executive of FTX, signed the bankruptcy filing, who had also worked on the bankruptcy proceedings of Enron.
The bankruptcy filing not only includes FTX Trading Ltd, but also 134 other affiliates. Some of these are Alameda Research, FTX US Services, FTX US Derivatives, FTX US Trading, Cedar Bay, Blockfolio, Atlantis Technology, Western Concord Enterprises, Liquid Financial, Ledger Holdings Inc., GG Trading Terminal DAAG Trading, Hawaii Digital Assets, Bitpesa and Global Compass Dynamics.
The former CEO of FTX and its founder, Sam Bankman-Fried, also authorized and signed the bankruptcy filing.
Alameda Research
Even though the filing was made on November 11th, SBF’s signature was done on November 10th. Of the 134 affiliates include, there are 11 that have the same first name as Alameda Research.
This is the quantitative crypto trading firm introduced by Sam Bankman-Fried, but it has been said that the company did no quantitative crypto trading.
According to a journalist, the company does not appear to have done any crypto trading, so what did it do?
It seems to have invested about $8 billion into a total of 448 startups, majority of which have zero documentation and about 1 to 10 employees.
The journalist said that it seems like a financial control feedback loop and it shows that the money eventually went to companies under SBF’s control, as they had no financial data, owner, or splash-page websites.
More issues
Some have claimed that no digital assets were traded by Alameda and that the company and SBF carried out trading of leveraged arbitrage schemes of approximately $25 million per day.
Alameda Research is also associated with a number of portfolio companies and its balance sheet also had a huge amount of FTT tokens, as compared to other assets belonging to the company.
Caroline Ellison, the CEO of Alameda, did not comment. Its day-to-day affairs were run by the CEO, along with Christian Drappi, Charlie Tsang, Nate Parke, Oliver Hamilton, Aditya Baradwaj and advisor Sam Trabucco.
Ellison’s father is a faculty member at MIT and his expertise is technology adoption, game theory and economics.