A Disastrous Duo
Market Meditations | November 21, 2022
After getting over the initial shock, it’s time to cut through the noise and look at the facts, which is exactly what Nansen has done with on-chain analysis of the FTX/ Alameda disaster.
Research Analysts at Nansen used the transaction data and wallet activities of crypto wallets that have been identified as belonging to FTX and Alameda Research.
They broke down the time periods and identified some key areas to review.
- Prior to May 2019: Using on-chain analytics, researchers were able to confirm rumors that Alameda was heavily involved with FTX from an early stage. This information is also supported in the recent bankruptcy filings, where the restructuring agent noted a lack of HR policy with blurred lines of responsibility between both the FTX and Alameda employees.
- August 2019-January 2020: FTX mints FTT and makes an Alameda wallet the sole and unchangeable beneficiary of the FTT token vesting contract. Most of the supply of FTT is held by FTX and Alameda, making the token’s price easy to manipulate… all the way to $84 (800x its seed price of $0.10).
- May 2022-July 2022: Throughout the bull market, Alameda was able to use FTT as collateral for loans, but after the collapse of UST, lenders were recalling loans. This is when it appears FTX had to lend Alameda even more money to prevent the liquidation of their FTT holdings, tanking its price.
The key takeaways from the Nansen research showed that the FTT token allowed Alameda to take collateral loans in the bull market that essentially resulted in an overleveraged long. As prices began to collapse and interest rates increased, margin calls were imminent. The success of FTX already hinged on Alameda’s success as a market maker, but the FTT token amplified their codependency and tethered FTX’s balance sheet to whoever was holding large amounts of FTT.