Alameda Research, TX’s sister trading desk, saved the exchange from a potential $1 billion trade loss in the beginning of 2021.
This information comes in the wake of former FTX CEO Sam Bankman-assertions Fried’s that FTX and Alameda were independent businesses.
According to those familiar with the situation, FTX sustained significant losses after a client’s leveraged deal on an obscure crypto currency went bad, as was revealed by the Financial Times on Friday. The “buffers” intended to safeguard the exchange from losses on a faulty trade, however, were unable to insulate FTX.
Collecting collateral up front from the borrower is a typical risk-management practice employed by businesses when lending money. The lender cancels the loan and sells the customers’ assets on their behalf to recoup its costs if the borrower’s collateral value falls below a certain amount.
The in question coin, named MobileCoin, experienced a price increase of $6 to $70 in April 2021 before experiencing a quick drop. When a trader at that time borrowed money against the coin while holding an excessively big stake, Alameda was forced to step in and aid settle the debt. The trading desk suffered a loss of hundreds of millions of dollars.
Nansen’s further blockchain evidence also reveals that Alameda served as FTX’s lender of last resort during times of cash shortage.Despite the ex-assertions CEO’s that he was unaware of what was happening at Alameda, the incident indicates close relationships between Alameda and FTX, both of which were founded by Sam Bankman Fried.
In a recent interview, Sam Bankman-Fried revealed that, before to going bankrupt, Alameda had an open leverage position with FTX worth billions of dollars.The FTT market was too illiquid and declined too quickly for FTX to liquidate the position and remain solvent even though the position had been collateralized by FTT token.