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Alameda Research

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Alameda Research
IndustryQuantitative trading, proprietary trading
FoundedNovember 2017; 7 years ago (2017-11)
FoundersSam Bankman-Fried, Tara Mac Aulay
FateChapter 11 bankruptcy
Headquarters
Hong Kong[1]
Key people
Caroline Ellison (CEO)[1]
Websitealameda-research.com

Alameda Research is a cryptocurrency trading firm, co-founded in September 2017 by Sam Bankman-Fried and Tara Mac Aulay.[2][3]

In November 2022, FTX, Bankman-Fried's 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 customer's funds to Alameda, a decision that the sources said Bankman-Fried described as a poor judgment call.[5][1] This was explicitly forbidden by FTX's terms-of-service.[6] On 12 November 2022, The Wall Street Journal reported that anonymous sources had said that Alameda CEO Caroline Ellison said that she, Bankman-Fried and other senior FTX officials were aware of that decision.[7]

Activities

As a quantitative trading firm specializing in cryptocurrencies, Alameda's strategies included arbitrage, market making, yield farming, and trading volatility.[1]

History

In November 2017, Sam Bankman-Fried co-founded Alameda Research as a quantitative trading firm, after he left his job at Jane Street Capital.[8] 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. [...] But everyone wants a Research Institute."[9][10][time needed]

In January 2018, Bankman-Fried organized an arbitrage trade, to take advantage of the higher price of bitcoin in Japan compared to the price in America.[8][11][12] The company earned about $20 million from the arbitrage opportunity.[13]

In late 2018, the headquarters of the firm was moved to Hong Kong.[8]

As of August 2021, Bankman-Fried owned approximately 90 percent of Alameda Research.[8]

According to public data reviewed by The Wall Street Journal, between early 2021 and March 2022, Alameda Research amassed crypto tokens ahead of FTX saying it would list them, totaling about $60 million worth of tokens in the Ethereum blockchain.[14]

Alameda Research suffered a series of losses in May and June 2022, which anonymous sources told The Wall Street Journal resulted in FTX lending the trading firm more than half of its customer's funds, a decision that the sources said FTX CEO Sam Bankman-Fried described as a poor judgment call.[5][1] This was explicitly forbidden by FTX's terms-of-service.[6] According to anonymous sources cited by The Wall Street Journal, Caroline Ellison said that she, Bankman-Fried and two other FTX executives, Nishad Singh and Gary Wang, were aware of the decision.[7]

In August 2022, the co-CEO of Alameda Research Sam Trabucco resigned from his job and Caroline Ellison became the firm's sole CEO.[15]

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. 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.[16] 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."[17] Principal shareholder Bankman-Fried had an estimated net worth of $10.5 billion in October 2022[18] and it dropped to approximately $1 billion according to the Bloomberg Billionaires Index following the crises and preliminary acquisition agreement on 8 November 2022.[16]

Late in the day on 9 November, the Wall Street Journal reported that Binance was walking away from the FTX acquisition.[19] Binance cited FTX's mishandling of customer funds and pending investigations of FTX as the reasons the firm would not pursue the deal.[20]

On 9 November 2022, Alameda's website was taken down.[21] The next day Bankman-Fried stated that Alameda Research was winding down trading and would close.[22] Alameda Research, along with FTX and more than 130 affiliated entities, filed for Chapter 11 bankruptcy in November 2022.[4][23]

References

  1. ^ a b c d e 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. ^ "Bankrupt crypto firm Celsius's biggest creditor linked to FTX founder Sam Bankman-Fried". Fortune. 14 July 2022. 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.{{cite web}}: CS1 maint: url-status (link)
  4. ^ a b 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. ^ a b 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. ^ a b Salmon, Felix (13 November 2022). "FTX's terms-of-service forbid trading with customer funds". Axios. Retrieved 13 November 2022.
  7. ^ a b Dave Michaels; Elaine Yu; Caitlin Ostroff (12 November 2022). "Alameda, FTX Executives Are Said to Have Known FTX Was Using Customer Funds". The Wall Street Journal. ISSN 0099-9660. Wikidata Q115184709. Retrieved 1 December 2022.
  8. ^ a b c d 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.{{cite news}}: CS1 maint: url-status (link)
  9. ^ "Sam Bankman-Fried and the spectacular fall of his crypto empire, FTX : Planet Money". NPR.org. Retrieved 24 November 2022.
  10. ^ "FTX: Building an Arbitrage Infrastructure for Traders". Real Vision. Retrieved 24 November 2022.
  11. ^ Wallace, Benjamin (2 February 2021). "The Mysterious Cryptocurrency Magnate Who Became One of Biden's Biggest Donors". Intelligencer. Retrieved 6 September 2021.
  12. ^ "The Ex-Trader Building a Multi-Billion Crypto Empire (Podcast)". Bloomberg. 31 March 2021. Retrieved 1 October 2021.{{cite news}}: CS1 maint: url-status (link)
  13. ^ Massa, Annie; Irrera, Annie; Miller, Hannah (14 September 2022). "Crypto Quant Shop With Ties to FTX Powers Bankman-Fried's Empire". Bloomberg News. Retrieved 14 November 2022.
  14. ^ "Alameda Amassed Crypto Tokens Ahead of FTX Listings, Public Data Shows". The Wall Street Journal. Retrieved 14 November 2022.
  15. ^ Miller, Hannah (24 August 2022). "Alameda Co-CEO Trabucco Steps Down From Crypto Trading Firm". Bloomberg News. Retrieved 15 November 2022.
  16. ^ a b "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.
  17. ^ 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.
  18. ^ 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.
  19. ^ 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.
  20. ^ Sigalos, MacKenzie; Rooney, Kate (9 November 2022). "Binance backs out of FTX rescue, leaving the crypto exchange on the brink of collapse". CNBC.
  21. ^ "Sam Bankman-Fried's Alameda Research website taken down amid FTX turmoil". Reuters. 9 November 2022. Retrieved 9 November 2022.
  22. ^ 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.
  23. ^ Yaffe-Bellany, David (11 November 2022). "Embattled Crypto Exchange FTX Files for Bankruptcy". The New York Times. Retrieved 13 November 2022.
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