Alameda Research

Last updated

Alameda Research
Company type Private
Industry Quantitative trading, proprietary trading
FoundedNovember 2017;7 years ago (2017-11)
Founders
FateFiled for Chapter 11 bankruptcy in November 2022
Headquarters
Hong Kong [1]
Key people
 Caroline Ellison (CEO) [1]
Website alameda-research.com

Alameda Research was a cryptocurrency trading firm, co-founded in September 2017 by Sam Bankman-Fried and Tara MacAulay. [2] [3] In November 2022, FTX, Alameda's sister cryptocurrency exchange, experienced a solvency crisis, and both FTX and Alameda filed for Chapter 11 bankruptcy. [4] That same month, anonymous sources told The Wall Street Journal that FTX had lent more than half of its customers' funds to Alameda, [5] [1] which was explicitly forbidden by FTX's terms-of-service. [6]

Contents

At Bankman-Fried's trial, Alameda CEO Caroline Ellison testified that she was one of Bankman-Fried's main accomplices in channeling FTX customer funds into Alameda's coffers. [7] In December 2022, Ellison pleaded guilty to two counts of wire fraud and five conspiracy counts involving wire, securities and commodities fraud and money laundering, in relation to her activities at Alameda Research and FTX. [8]

History

Foundation

In November 2017, Sam Bankman-Fried co-founded Alameda Research as a quantitative trading firm, after he left his job at Jane Street Capital. [9] The firm was based in Berkeley, California, where Bankman-Fried moved that same year. [10] He had recruited about 20 young effective altruists, most of whom had no experience trading in financial markets nor were aware of cryptocurrencies. [11] Per a 2021 interview, the term 'research' was included in the name to avoid scrutiny, with Bankman-Fried saying, "if you named your company like We Do Cryptocurrency Bitcoin Arbitrage Multinational Stuff, no one's going to give you a bank account". [12]

In January 2018, Bankman-Fried organized an arbitrage trade to take advantage of the higher price of bitcoin in Japan versus in America. [9] [13] [14] The company earned between $10 million and $30 million before the price gap closed in early 2018. [15] [16] In early 2019, the firm moved its headquarters from California to Hong Kong. [16] As of August 2021, Bankman-Fried owned approximately 90 percent of Alameda Research. [9]

Launch of FTX

Sam Bankman-Fried started his own crypto exchange in April 2019 under the name FTX. Alameda Research played a significant role in the growth of FTX, as it acted as FTX's main market maker, [16] available to buy and sell with other customers, sometimes taking trading losses to attract customers to the exchange. [16] According to public data reviewed by The Wall Street Journal , between early 2021 and March 2022, Alameda Research amassed crypto tokens ahead of FTX listing them for trading, especially on the Ethereum blockchain, with a value of about $60 million. [17]

The Wall Street Journal, citing anonymous sources, reported that Alameda Research suffered a series of losses in May and June 2022 which were covered by FTX lending the trading firm more than half of its customer's funds; FTX CEO Sam Bankman-Fried reportedly described this as a poor judgment call. [5] [1] Pantheri Asset Management made $10.7 million as a counterparty of Alameda. [18] In August 2022, Alameda co-CEO Sam Trabucco resigned, and Caroline Ellison became the firm's sole CEO. [19]

Bankruptcy

On 8 November 2022, following a liquidity crisis at FTX, a large cryptocurrency exchange, Binance and FTX signed a letter of intent for FTX to be acquired by Binance. [20] The value of Alameda was affected, and was estimated to have dropped over 90 percent following the public disclosure of problems and the FTX acquisition deal. [21] Alameda held a large quantity of FTT, the native token of the FTX exchange, as assets on its books. TechCrunch reported that "the exchange was unusually intertwined with its sister entity, Alameda Research." [22] Principal shareholder Bankman-Fried had an estimated net worth of $10.5 billion in October 2022 [23] and it dropped to approximately $1 billion according to the Bloomberg Billionaires Index following the crises and preliminary acquisition agreement on 8 November 2022. [21]

Late in the day on 9 November, The Wall Street Journal reported that Binance was walking away from the FTX acquisition, [24] blaming FTX's mishandling of customer funds and pending investigations of FTX. [25] On 9 November 2022, Alameda's website was taken down. [26] The next day Bankman-Fried said Alameda Research was winding down trading and would close. [27] Alameda Research, along with FTX and more than 130 affiliated entities, filed for Chapter 11 bankruptcy protection in November 2022. [4] [28]

Activities and donations

As a quantitative trading firm specializing in cryptocurrencies, Alameda's strategies included arbitrage, market making, yield farming, and trading volatility. [1] [15] During the 2020 United States presidential election, Alameda gave $5 million to Future Forward USA, a liberal political action committee (PAC) in support of President Joe Biden. In 2022, Alameda reportedly donated $5 million to Guarding Against Pandemics, a PAC run by Sam Bankman-Fried's brother, Gabe. [29] The company provided financial support to the Worldwide Online Olympiad Training program by the Art of Problem Solving. [30]

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References

  1. 1 2 3 4 5 Vicky Ge Huang; Alexander Osipovich; Patricia Kowsmann (11 November 2022). "FTX Tapped Into Customer Accounts to Fund Risky Bets, Setting Up Its Downfall". The Wall Street Journal . ISSN   0099-9660. Wikidata   Q115175398 . Retrieved 6 December 2022.
  2. ↑ Brewster, Lucy (14 July 2022). "Bankrupt crypto firm Celsius's biggest creditor linked to FTX founder Sam Bankman-Fried". Fortune. Retrieved 30 November 2022.
  3. ↑ Nicolle, Emily; Irrera, Anna; Griffin, Donal (14 July 2022). "Celsius Bankruptcy Filing Shows Long Reach of FTX's Sam Bankman-Fried". Bloomberg. Retrieved 12 November 2022.
  4. 1 2 Caitlin Ostroff; Vicky Ge Huang; Alexander Gladstone (11 November 2022). "FTX Files for Bankruptcy, CEO Sam Bankman-Fried Resigns". The Wall Street Journal . ISSN   0099-9660. Wikidata   Q115175397 . Retrieved 6 December 2022.
  5. 1 2 Berwick, Angus; Wilson, Tom (10 November 2022). "Exclusive: Behind FTX's fall, battling billionaires and a failed bid to save crypto". Reuters. Retrieved 13 November 2022.
  6. ↑ Salmon, Felix (13 November 2022). "FTX's terms-of-service forbid trading with customer funds". Axios. Retrieved 13 November 2022.
  7. ↑ Yaffe-Bellany, David (11 October 2023). "Caroline Ellison Says She and Sam Bankman-Fried Lied for Years". The New York Times.
  8. ↑ Yaffe-Bellany, David; Goldstein, Matthew; Weiser, Benjamin (22 December 2022). "Two Executives in Sam Bankman-Fried's Crypto Empire Plead Guilty to Fraud". The New York Times. Retrieved 14 August 2023.
  9. 1 2 3 Parloff, Roger (12 August 2021). "Portrait of a 29-year-old billionaire: Can Sam Bankman-Fried make his risky crypto business work?". Yahoo! Finance . Retrieved 6 September 2021.
  10. ↑ Matthew Goldstein; Alexandra Stevenson; Maureen Farrell; David Yaffe-Bellany (18 November 2022). "How FTX's Sister Firm Brought the Crypto Exchange Down". The New York Times . ISSN   0362-4331. Wikidata   Q120671792 . Retrieved 15 July 2023.
  11. ↑ Lewis, Michael (4 October 2023). "When Caroline Ellison Met Sam Bankman-Fried" . The Wall Street Journal .
  12. ↑ "Sam Bankman-Fried and the spectacular fall of his crypto empire, FTX : Planet Money". NPR.org. Retrieved 24 November 2022.
  13. ↑ Wallace, Benjamin (2 February 2021). "The Mysterious Cryptocurrency Magnate Who Became One of Biden's Biggest Donors". Intelligencer. Retrieved 6 September 2021.
  14. ↑ "The Ex-Trader Building a Multi-Billion Crypto Empire (Podcast)". Bloomberg. 31 March 2021. Retrieved 1 October 2021.
  15. 1 2 Annie Massa; Anna Irrera; Hannah Miller (14 September 2022). "Crypto Quant Shop With Ties to FTX Powers Bankman-Fried's Empire". Bloomberg News . Wikidata   Q120671707 . Retrieved 15 July 2023.
  16. 1 2 3 4 Patricia Kowsmann; Vicky Ge Huang; Caitlin Ostroff; Gregory Zuckerman (31 December 2022). "Troubles at Sam Bankman-Fried's Alameda Began Well Before Crypto Crash". The Wall Street Journal . ISSN   0099-9660. Wikidata   Q115943621 . Retrieved 1 January 2023.
  17. ↑ "Alameda Amassed Crypto Tokens Ahead of FTX Listings, Public Data Shows". The Wall Street Journal. Retrieved 14 November 2022.
  18. ↑ "Digital Asset Firm Pantheri Asset Management profits $10.7 million through being Alameda Research Counterparty in Trade". The Financial Bureau. 31 July 2022. Retrieved 30 December 2022.
  19. ↑ Hannah Miller (24 August 2022). "Alameda Co-CEO Trabucco Steps Down From Crypto Trading Firm". Bloomberg News . Wikidata   Q119727121 . Retrieved 15 July 2023.
  20. ↑ Hern, Alex (8 November 2022). "Binance to buy FTX in major cryptocurrency exchange merger". The Guardian. ISSN   0261-3077 . Retrieved 30 August 2023.
  21. 1 2 "Crypto's golden boy Sam Bankman-Fried sees $14.6 billion wiped from his personal wealth overnight after agreeing to FTX bailout deal". Fortune . 9 November 2022. Retrieved 9 November 2022.
  22. ↑ Crypto’s biggest M&A deal, between Binance and FTX, looks unlikely to close Archived 9 November 2022 at the Wayback Machine , TechCrunch, 9 November 2022.
  23. ↑ Kulish, Nicholas (8 October 2022). "How a Scottish Moral Philosopher Got Elon Musk's Number". New York Times . ISSN   0362-4331 . Retrieved 9 October 2022.
  24. ↑ Patricia Kowsmann; Caitlin Ostroff; Berber Jin (10 November 2022). "Binance Walks Away From Deal to Rescue FTX". The Wall Street Journal . ISSN   0099-9660. Wikidata   Q115184738 . Retrieved 12 November 2022.
  25. ↑ Sigalos, MacKenzie; Rooney, Kate (9 November 2022). "Binance backs out of FTX rescue, leaving the crypto exchange on the brink of collapse". CNBC .
  26. ↑ "Sam Bankman-Fried's Alameda Research website taken down amid FTX turmoil". Reuters . 9 November 2022. Retrieved 9 November 2022.
  27. ↑ Singh, Manish (10 November 2022). "Sam Bankman-Fried says FTX in talks to raise capital, Alameda Research to wind down trading". TechCrunch. Retrieved 10 November 2022.
  28. ↑ Yaffe-Bellany, David (11 November 2022). "Embattled Crypto Exchange FTX Files for Bankruptcy". The New York Times. Retrieved 13 November 2022.
  29. ↑ Schwartz, Brian (19 December 2022). "How former crypto king Sam Bankman-Fried and friends quietly donated to political groups and relatives". CNBC . Archived from the original on 22 December 2022. Retrieved 27 March 2023.
  30. ↑ "WOOT: Worldwide Online Olympiad Training". Art of Problem Solving. Archived from the original on 6 April 2022. Retrieved 22 March 2023.{{cite web}}: CS1 maint: unfit URL (link)
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