Alameda Research
Alameda Research was a cryptocurrency trading firm and liquidity provider co-founded in September 2017 by Sam Bankman-Fried, Gary Wang, and Tara Mac Aulay. On November 11, 2022, Alameda Research alongside its sister company, FTX filed for Chapter 11 bankruptcy due to a solvency crisis. [6][1][2]
History
Alameda Research was a Hong Kong-based private equity firm co-founded by Sam Bankman-Fried in September 2017. It was a sister company of FTX, the cryptocurrency exchange that collapsed in November 2022. Alameda Research was a quantitative cryptocurrency trading firm that provided liquidity in cryptocurrency and digital assets markets. [4]
On August 24, 2022, Sam Trabucco, the co-CEO of Alameda Research stepped down from his leadership role to become an adviser of the firm. Trabucco said in a tweet thread that he had significantly reduced his role at Alameda over the past few months, noting he reached a point in life where had to “prioritize other things” such as his personal life. “I needed to relax,” he tweeted.[17][18]
Alameda's DeFi Investment
Alameda was a major DeFi investor. According to its Crunchbase[22] profile, the company made 286 investments in companies like Aptos, Optim Finance, Cardinal, etc. in the five years of its existence. [23]
The investments also included several capital injections for firms working on DeFi solutions. On 8 November 2022, fintech and software company Fordefi announced it had raised $18m for the launch of an institutional DeFi wallet from Alameda and other investors. [23]
Alameda Research's Bankruptcy
In November 2022, Bankman-Fried announced that Alameda Research and FTX had filed for Chapter 11 bankruptcy along with other companies related to FTX. Websites for Alameda Research and the company’s venture capital arm, FTX Ventures, were offline and made private. [8]
The founder Sam Bankman-Fried resigned from his position as CEO and was replaced by John J. Ray III. On November 17, Ray stated in a sworn declaration submitted in bankruptcy court that according to the firm's records, Alameda Research had lent $1 billion to Bankman-Fried. [7][13]
Anonymous sources cited by the Wall Street Journal on November 10, 2022, said that Alameda Research owed FTX some $10 billion, as FTX had lent funds placed on the exchange for trading to Alameda so that Alameda could make investments with the money. Since FTX had $16 billion in customer assets, the exchange lent over half of its customer funds. [9]
Trading platforms are required by their regulators to hold enough money to match what customers deposit and Alameda Research had underestimated the amount FTX needed to keep on hand in order for customers to cash out. Aside from FTX, Alameda had to take out additional loans from other financial firms too, which totaled $1.5 billion, the report said, citing people familiar with the matter. [9]
On November 12, 2022, anonymous sources cited by the Wall Street Journal said Alameda CEO Caroline Ellison[19] disclosed to other Alameda employees that she, Sam Bankman-Fried, Gary Wang, and Nishad Singh knew that client deposits were transferred from FTX to Alameda. Ellison also said the funds were partly used to pay back loans Alameda had taken to make investments. [11]
Alameda Research held part of the supply of tokens of FTX, called FTT. The token collapsed after Binance's CEO Changpeng Zhao made an announcement[24] that it was selling its $580 million worth of the token due to concerns about its stability and other revelations that had come to light. Other token holders also started selling it, and the token collapsed as a result. The collapse of Alameda came after a leaked balance sheet revealed that the company’s books relied heavily on the FTX token (FTT) issued by FTX. [10][12]
Investigations & Arrests
Following the firm's collapse, the Royal Bahamas Police Force launched a criminal investigation into the company. On 15 November 2022, a class-action lawsuit was filed in Miami against CEO, Bankman-Fried. [14]
On 13, December 2022, Founder Bankman-Fried was arrested in his apartment in the Bahamas by the Royal Bahamas Police Force. The arrest was made in response to charges brought against him by the Southern District of New York, including "wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering." Following a court hearing on Dec. 22, 2022, a federal judge decided to release Bankman-Fried from custody after his attorneys and federal prosecutors agreed to a $250 million bond. [14]
On 21, December 2022, both Caroline Ellison (former CEO of Alameda) and Gary Wang (former Chief Technology Officer of FTX) pled guilty to fraud and other charges and agreed to cooperate with federal investigators in the criminal case against Bankman-Fried. Former Alameda Research director, Nishad Singh, pled guilty to six different charges, including three counts of conspiracy to commit fraud. [15][16]
Donations
During the 2020 United States presidential election, Alameda contributed $5 million to Future Forward USA, a liberal political action committee (PAC) supporting President Joe Biden. In 2022, Alameda reportedly donated $5 million to Guarding Against Pandemics, a PAC established by Sam Bankman-Fried's brother, Gabe. [20]
Additionally, the company provided financial assistance to the Worldwide Online Olympiad Training program through the Art of Problem Solving. [21]
