Is Crypto Whale Alameda Research in Financial Trouble?

In response to new reporting, Alameda Analysis’s stability sheet was largely composed of illiquid FTT and SOL tokens final summer time. This growth casts doubt on the agency’s capability to repay its excellent money owed if required.  

Operating the Numbers on Alameda’s Stability Sheet

Even Alameda Analysis has been hit by the crypto bear market, in keeping with new reporting digging into the agency’s funds. 

A Wednesday CoinDesk report quoting an unnamed supply has claimed that the quantitative buying and selling agency held greater than $14.6 billion in property on June 30, towards $8 billion in liabilities. Alameda was co-founded by crypto billionaire Sam Bankman-Fried in 2017, two years earlier than he launched his wildly profitable cryptocurrency change, FTX.

Alameda is named one among crypto’s largest whales, however a detailed take a look at the numbers quoted within the CoinDesk article suggests that the agency could also be in a way more precarious scenario than onlookers would have anticipated.

In response to the report, the $14.6 billion the agency held on June 30 included $3.66 billion in unlocked FTT, $2.16 billion in FTT collateral, $2 billion in equities, $3.37 billion of “crypto held,” and $134 million in money. That equates to $11.32 billion, with $3.28 billion unaccounted for.  

In the meantime, Alameda’s loans come to $8 billion, which embody $292 million in locked FTT and $863 million in locked SOL. Curiously, CoinDesk claims that Alameda valued these two liabilities at 50% decrease than the honest market worth as a result of the tokens are locked. Treating them at honest market worth would add greater than $1.1 billion to Alameda’s liabilities.

Because of this Alameda at present has over $6.11 billion in FTT on its books, $5.82 billion of which it counts as property. FTT is a coin launched by FTX that merchants can stake to unlock reductions (from 3% to 60%) on buying and selling charges. FTT is among the largest cash within the crypto ecosystem, however in keeping with FTX’s official web site, there are at present 197,091,309 FTT in circulation, placing the coin’s market capitalization at $4.87 billion. Which means the present FTT market is totally illiquid so far as Alameda is anxious. It’s holding $5.82 billion value of a token that it will probably’t promote with out cratering its worth. 

There are additionally different factors of concern surrounding the corporate’s stability sheet. In response to the report, Alameda counted Solana-based tokens like SOL, SRM, FIDA, MAPS, and OXY amongst its $3.37 billion in crypto property. Since these have been the tokens talked about by identify on the stability sheet, it will be honest to imagine they constituted Alameda’s largest holdings. Whereas the precise quantity of every token the agency is holding is unknown, most of them have posted woeful performances all through the bear market. SRM, FIDA, MAPS, and OXY are all down over 93% from their peaks with markets which can be sure to turn into extremely illiquid. If these tokens are consultant of Alameda’s mixed crypto holdings, the agency would wrestle to money in on its $3.37 billion in crypto property if it ever needed to.

Crypto Briefing’s Take

There are just a few caveats to this evaluation. First, Crypto Briefing didn’t acquire entry to Alameda’s stability sheet—these figures are primarily based on CoinDesk reporting. Second, even when these numbers have been appropriate on the finish of June, Alameda has had 4 months to make adjustments to its holdings. Lastly, Alameda’s monetary statements could comprise unknown data that places the agency’s place in a a lot better gentle.

Nonetheless, taking these numbers at face worth, evidently Alameda is in a troublesome scenario. The agency has $8 billion in liabilities, however it appears obvious from the numbers that it doesn’t have sufficient property to pay them off. 

After all, the scenario is prone to be extra advanced. Whereas Bankman-Fried stepped down as Alameda’s CEO some time in the past, the agency has a decent relationship with FTX. Given FTX’s historical past of providing bailouts this yr, it’s not laborious to think about the change stepping in to assist Alameda if wanted. 

However the agency’s obvious monetary difficulties shed new gentle on Bankman-Fried’s cavalier angle in the course of the summer time. All through Could and June, brutal market circumstances worn out crypto hedge fund Three Arrows Capital, which occurred to owe billions of {dollars} to a number of main crypto lenders, together with Voyager and BlockFi. Bankman-Fried shortly supplied to bail out struggling corporations, citing the necessity to reaffirm buyers’ belief within the markets. By his actions, Bankman-Fried earned a status as crypto’s lender of final resort; he even proclaimed in July that he had over $2 billion able to deploy to forestall additional contagion.

This reported stability sheet, nevertheless, could also be telling a unique story. If Alameda was caught in illiquid tokens because the market was tanking, there’s a risk that Bankman-Fried determined to step up not for the sake of the crypto market itself, however merely to save lots of Alameda. On this situation, stabilizing the market, lowering panic, and exhibiting energy may have been a technique to reassure Alameda collectors—and stop them from asking the agency to pay again its loans. 

Editor’s be aware: A earlier model of this text incorrectly said that Alameda Analysis had $7.4 billion in liabilities. The piece has been up to date to notice that the agency in actual fact had $8 billion in liabilities, per CoinDesk’s November 2 report. 

Disclosure: On the time of writing, the writer of this piece owned BTC, ETH, and a number of other different crypto property.