What was between FTX and Alameda Research
2022.12.14 07:35
What was between FTX and Alameda Research
Budrigannews.com – Court filings continue to shed light on the dubious relationship between FTX and Alameda Research, in which the hedge fund received an unprecedented access to user holdings on the cryptocurrency exchange as well as an “unfair” trading advantage.
On December 1, the United States Commodities Futures Trading Commission filed a complaint in the Southern District Court of New York, claiming that Sam Bankman-Fried’s trading company Alameda Research and his cryptocurrency exchange FTX engaged in numerous unethical business dealings.
The complaint makes a lot of claims about how certain insiders, including Bankman-Fried, and the two companies broke the Commodity Exchange Act and other rules. The CFTC outlines how Bankman-Fried owned and operated Alameda and its related entities from May 2019 until their collapse in November 2022. This comes after the former CEO was arrested on December 12 in the Bahamas and is scheduled to be extradited to the United States.
Alameda was FTX.com’s primary market maker, providing cryptocurrency markets with liquidity. The businesses functioned as a “common enterprise,” but the CFTC claims that this was abused in a variety of ways.
The filing says that a small group of insiders let FTX customers’ deposits in fiat currencies like Bitcoin (BTC) and Ether (ETH) be “accepted, held by, and/or appropriated by Alameda” for its own use.
Besides, the CFTC claims that FTX chiefs made highlights in the trade’s code that permitted ‘Alameda to keep a basically limitless credit extension on FTX.’
Alameda was given “an unfair advantage” when trading on FTX through the creation of additional exceptions. This included a waiver from the exchange’s “distinctive auto-liquidation risk management process” and shorter execution times for trading.
Additionally, it is alleged that Bankman-Fried and another Alameda executive instructed the hedge fund to fund a “variety of high-risk digital asset industry investments” with user funds and FTX.
Additionally, Alameda was robbed of hundreds of millions of dollars in undocumented “loans” by Bankman-Fried and other FTX executives. These funds were used to make political donations and buy expensive properties and real estate.
While FTX Trading claimed in its terms of service that customers owned and maintained control of assets in their accounts and that these were safeguarded and separated from FTX’s funds, widespread misappropriation of customer funds occurred.
