Decoding the FTX Collapse: Nansen Report Unveils $4.1 Billion FTT Transfer and Alameda’s Liquidity Crunch

The FTX saga continues to unravel, and blockchain sleuths at Nansen have dug deeper into the digital footprints left behind in the lead-up to its dramatic implosion. Remember the shocking news of FTX’s collapse? Well, Nansen’s latest report shines a new light on the events, specifically focusing on the intricate relationship between FTX and Alameda Research, both founded by Sam Bankman-Fried. As SBF faces serious charges in court, these on-chain insights are more crucial than ever.

The FTT Token Transfer: A $4.1 Billion Puzzle Piece

Initial reports pointed fingers at Alameda’s balance sheet, highlighting a concerning 40% of its $14.6 billion assets held in FTT tokens back in September 2022. This raised eyebrows, but Nansen’s analysis reveals that the suspicious activity started even earlier.

According to their report, shared with Cointelegraph, Nansen analysts spotted some eyebrow-raising on-chain interactions before these red flags were publicly raised. Let’s break down what they found:

• Massive FTT Flow: Between September 28th and November 1st, Alameda Research sent a staggering $4.1 billion worth of FTT tokens to FTX. Yes, you read that right – billion with a ‘B’!
• Stablecoin Streams: Alongside the FTT flood, there were also consistent transfers of $388 million in stablecoins pegged to the US dollar moving from Alameda to FTX.

This significant movement of assets raises serious questions about the financial dealings between these two entities. Was this just routine treasury management, or was something more complex, and potentially problematic, going on?

FTT’s Centralized Control: 80% Held by FTX?

The Nansen report further highlights the concentrated nature of FTT token ownership. Imagine this: out of the total 350 million FTT tokens in existence, FTX reportedly held around 280 million. That’s a whopping 80% of the entire supply!

Blockchain data also paints a picture of intense trading activity. Nansen observed “considerable” FTT trading volumes, amounting to billions of dollars, circulating between FTX and Alameda wallets. This constant back-and-forth raises questions about market manipulation and artificial inflation of FTT’s trading volume.

The Vesting Contract: Alameda’s Sole Benefit?

Here’s another layer to the FTT puzzle: a large chunk of the FTT supply, including company tokens and unsold tokens, was locked up in a three-year vesting contract. And guess who the sole beneficiary of this contract was? According to Nansen’s analysis, it’s a wallet controlled by Alameda.

This concentration of FTT, with approximately 90% of the supply controlled by FTX and Alameda, leads Nansen to a stark conclusion: these entities were potentially propping up each other’s balance sheets. Think of it like this – if you and your company control the majority of your own company’s token, you can artificially inflate its perceived value.

Beyond Exchanges: FTT as Collateral and OTC Sales

Nansen’s report suggests Alameda wasn’t just holding onto FTT; they were actively using it in other ways:

• Over-the-Counter (OTC) Sales: Alameda likely sold FTT tokens directly to buyers in private, OTC deals.
• Loan Collateral: FTT was probably used as collateral to secure loans from cryptocurrency lending firms.

To support this theory, Nansen points to historical on-chain data revealing frequent large inflows and outflows between FTX, Alameda, and Genesis Trading wallets. They observed transfer volumes reaching up to $1.7 billion as far back as December 2021. This suggests a complex web of financial interactions involving FTT.

“This theory is backed by historical on-chain data where we observed regular large inflows and outflows between FTX, Alameda and Genesis Trading wallets with transfer volumes up to $1.7 billion as seen in Dec 2021.”

The $4 Billion Loan Theory: 3AC’s Domino Effect?

Remember the Terra (LUNA) ecosystem collapse and the subsequent downfall of Three Arrows Capital (3AC)? Nansen’s report connects these events to Alameda’s liquidity woes. The theory is that the Terra/3AC contagion triggered a drop in FTT’s value, creating a liquidity crunch for Alameda.

And here’s where things get really interesting: Nansen suggests that FTX might have provided a covert, $4 billion loan to Alameda, backed by – you guessed it – FTT tokens.

“Our on-chain data indicates that this may have happened. Amidst the collapse of 3AC in mid-June 2022, Alameda sent ~163m of FTT to FTX wallets, worth ~$4b at that time.”

The timing is crucial here. This $4 billion transaction volume, observed on-chain, coincided with a $4 billion loan figure that close associates of Bankman-Fried reportedly disclosed in an interview with Reuters. This convergence of on-chain data and insider information adds weight to the loan theory.

Binance’s Exit and Alameda’s Missed Opportunity

The Nansen report also sheds light on the final days before the FTX collapse. When Binance CEO Changpeng Zhao (CZ) announced Binance would offload its FTT holdings due to concerns about Alameda’s financial health, Alameda reportedly made an offer to buy those tokens at $22 each on November 6th.

However, blockchain data indicates that Alameda likely wouldn’t have been able to fulfill this purchase. This suggests that Alameda’s liquidity issues were far more severe than publicly acknowledged, even in those final critical moments.

Key Takeaways from Nansen’s On-Chain Investigation

Let’s summarize the crucial insights from Nansen’s report:

• Significant FTT Transfers: A massive $4.1 billion FTT transfer from Alameda to FTX in the weeks leading up to the collapse.
• Centralized FTT Control: FTX and Alameda controlled approximately 90% of the total FTT supply.
• Potential Balance Sheet Propping: The close relationship and FTT control suggest potential manipulation to inflate balance sheets.
• FTT as Collateral & OTC Sales: Alameda used FTT for loans and OTC sales, indicating wider integration into their financial operations.
• $4 Billion Loan Theory: On-chain data supports the theory of a $4 billion FTT-backed loan from FTX to Alameda during the 3AC crisis.
• Liquidity Crunch Exposed: Alameda’s inability to buy FTT from Binance highlighted their severe liquidity issues.

The Power of On-Chain Analysis in Crypto Forensics

Nansen’s report underscores the immense value of blockchain analysis in understanding the complexities of crypto collapses. By meticulously examining on-chain data, analysts can uncover hidden transactions, trace asset flows, and reconstruct the financial narratives behind major events like the FTX downfall.

As the FTX legal proceedings continue, these on-chain insights will undoubtedly play a critical role in piecing together the full picture and holding those responsible accountable. The story of FTX is a stark reminder of the risks and opaqueness that can exist in the crypto world, and the importance of transparency and robust financial scrutiny.