The FTX crash left the market in disarray after it halted withdrawals and filed for bankruptcy. Apart from FTX, other companies have also filed for bankruptcy due to loss of funds on the exchange.
During the filing, the crypto market learned that the company lacked a proper structure to manage its operations. This is why many top shots declared the downfall due to the management of the exchange. Moreover, SBF used clients’ assets without their knowledge, pointing the finger at poor management.
But the question becomes interesting as SBF continues to try to shield Alameda Research from FTX’s troubles. Alameda even acted earlier before the exchange collapsed to withdraw $204 million from FTX, thus protecting itself from the crash.
Sam Bankman-Fried previously denied that the two companies operate together. But the latest reports revealed that Alameda and FTX are in sync with each other.
Alameda’s 2021 FTX Support Revealed
While SBF denies joint operations with Alameda Research, those interested in the case expose their cooperation. Investigations revealed that Alameda once covered a $1 billion loss for the SBF-led crypto exchange in 2021.
The details of the bailout are that FTX suffered losses due to a client’s leveraged trade that went south. Unfortunately, the FTX pads that would have protected it from losses failed. The obscure token was MobileCoin, which recorded an unimaginable price surge but could not sustain it.
The price of MobileCoin skyrocketed from $6 to $70 in April 2021. Then, after a short time, the crypto crashed causing a massive loss to a trader who borrowed heavily against it. As a result, the FTX exchange suffered millions in losses, which led to the bailout of Alameda.
SBF crypto exchange has allowed the trader to take advantage of MobileCoin as it is a common practice among crypto exchanges. Usually, users of exchanges that offer leverage would use their assets as collateral for leveraged positions.
If by chance the value of the asset drops, the exchange would liquidate the positions themselves to get their money back. But MobileCoin’s drop was too small for FTX to recoup its costs.
FTX turned to Alameda as a last resort
The MobileCoin crash resulted in hundreds of millions of dollars in losses for the SBF crypto exchange. But Alameda rushed to save the company. The action shows that the sister company of FTX was its last resort in times of shortage of funds.
Many people disagree with SBF’s claims that Alameda and FTX operate independently. Given that the company will rescue the other in a crisis, it’s obvious that the former CEO’s claims that he doesn’t know how Alameda works are a lie.
SBF said in a November interview that Alameda Research had a leveraged position worth billions of dollars with FTT before its bankruptcy. But, unfortunately, the exchange could not liquidate it due to the speed at which FTT crashed.
Featured image from Pixabay, chart from TradingView.com