Collapse.
Nansen’s evaluation crew dives into the collapse of Alameda and FTX using blockchain analytics
It started with CoinDesk reporting that “There are additional FTX tokens amongst its $8 billion of liabilities: $292 million of “locked FTT.” (The liabilities are dominated by $7.4 billion of loans.).
” Subsequent, Alameda Evaluation’s CEO, Caroline Ellison, equipped to buy up Binance’s FTX Tokens (FTT) at $22 per token. What adopted was undoubtedly one amongst crypto’s craziest events – the collapse of FTX and Alameda.
So how did this happen? Did the de-pegging of TerraUSD, Luna’s failure, and the chapter of 3AC all lead to FTX and Alameda’s fall from grace?
Or was it mismanagement of hazard and misuse of customers’ funds all alongside?
Nansen has compiled an in-depth analysis using on-chain info to piece collectively the fallen dominos of FTX and Alameda. The place doable, we aspire to current an aim account backed by on-chain proof.
Our look at would not cowl potential off-chain events. This evaluation leverages Nansen’s labeling heuristics to hint recognized wallets of the involved entities and verify their actions on-chain, to make sense of what actually occurred within the course of the FTX-Alameda debacle.
To position it merely, our on-chain analysis makes use of knowledge from a blockchain ledger to seek out out the sequence of events and fund balances related to the autumn of FTX and Alameda. Evaluation Analysts take a look at the transaction info and crypto pockets actions of the involved entities, two essential info sources useful when making an attempt to piece collectively what had occurred.
Using a confirmed methodology that we had beforehand used for various on-chain analyses (TerraUSD de-peg, stETH de-peg), we framed our look at using a grounded precept technique the place a listing of pockets balances and transaction volumes processed by these wallets are on the core of this look at.
By means of a analysis of grey literature akin to social media dialogue board threads, media safety, and podcasts, we narrowed the scope of our look at to present consideration to transactional info inside the following timeframes:
We moreover paid shut consideration to a set of pockets addresses which we now have acknowledged as each FTX’s or Alameda’s, you can see the report of addresses and labels inside the Appendix Half.
The report is formatted in three distinct sections. Half 1 acts as a prologue, providing the context to navigate the connection between FTX, Alameda, and their interactions with the FTX Token (FTT). Half 2 particulars the interaction and entanglement between FTX and Alameda by among the many important events inside the newest market cycle. Lastly, Half 3 zooms in on the on-chain info, primarily between 2 November and 9 November.
We strive and triangulate in type (on-line) narratives with the variable on-chain footprints to make sense of FTX’s and Alameda’s positions and holdings all through this period. It is no secret that Alameda and FTX have been every based mostly by SBF, and had ongoing partnerships. Nonetheless, it is rumored that FTX was solely really started to spice up funds for Alameda and the two colluded from the very beginning.
We leveraged on-chain proof to draw doable interpretations.
It is no secret that Alameda was one amongst, if not the earliest, liquidity suppliers on FTX. Nonetheless, this poses a question of how involved the two entities have been.
What was seen:
Alameda’s pockets interacted with FTX sooner than it had even launched in Would possibly 2019; aside from completely different CEX addresses, it was the one clearly identifiable counterparty.
What it could suggest:
Although comparatively low in amount (~$160k), this strongly signifies that each Alameda was carefully involved in FTX’s inception or there was no clear separation between Alameda and FTX then – and perhaps, even every.
FTT is a utility token for the FTX platform, it would not entitle prospects to half of the platform revenue or characterize a share in FTX. It is not backed nor does it give administration over governance alternatives or FTX’s treasury.
What we seen:
Two days sooner than the official itemizing on FTX on 29 July 2019, Alameda acquired 5m FTT in three transactions immediately from the FTX Deployer (who minted the FTT) to their FTX account.
Furthermore, 20m FTT have been deposited by the FTX Deployer to an FTX-related FTX deposit pockets on the day of the itemizing. These have been the whole thing of FTT in circulation on the time.Roughly per week after the itemizing, 5m FTT was despatched once more to the FTX Deployer on 5 August 2019.
What it could suggest:
The 5m FTT returned to the FTX Deployer usually tend to be the an identical ones deposited into the Alameda FTX account.
An optimistic interpretation may very well be that Alameda was involved inside the market-making of FTT tokens. This precept, nonetheless, would not make clear why the funds have been despatched once more solely after a pair of days.
A pessimistic interpretation may very well be that Alameda profited off the ICO contributors by selling the tokens sooner than completely different patrons’ tokens have been unlocked and searching for them once more cheaper afterward to return to FTX.
What we seen:
Using the official token distribution from the FTX docs and evaluating it to on-chain actions starting from the first token actions after minting in late July 2019 until December 2020, a doable state of affairs could also be devised for the early distribution of FTT:
Observing the above parameters, we well-known some key observations:
What it could suggest:
Our observations raised extra questions: Why was there a necessity for FTX to have such a concentrated present of tokens? Why would they choose a pockets (Alameda’s) as a result of the beneficiary for the FTT agency tokens, that is not immediately managed by FTX themselves?
There was, nonetheless, a limitation in utilizing on-chain info to ground options to these questions. Subsequently, we centered on what could also be answered by on-chain info as a substitute.
Early transaction train of FTT steered that:
Fast forward to the bull market of 2021, the FTT token seen a meteoric rise, roughly 800x from the seed worth of $0.10 to $84 at ATH in summer season season 2021.
The rise inside the worth of FTT seen the completely diluted valuation of FTT reached almost $30b on the all-time highs – most of which have been owned by Alameda and FTX.
Regardless that the tokens are technically liquid, these parts would have been inconceivable to liquidate for Alameda inside the open market. Alameda selling might set off intensive downward swings in worth, and in flip devalue their very personal remaining positions along with these of the other holders, with FTX being by far the largest.
This was a gordian knot for Alameda’s FTT holdings and created an additional co-dependency between Alameda and FTX.
With Alameda not being able to advertise its FTT holdings in large parts, and FTT not producing adequate liquid revenue, the potential selections for them to accumulate liquidity using FTT have been:
Discover that tons of the strategies to entry liquidity using FTT have been already utilized by FTX from the start, with FTX prospects as a result of the counterparty. Whereas OTC selling and liquidity provision are comparatively a lot much less harmful, borrowing in the direction of FTT is taken into consideration harmful as a liquidation event would have an enormous harmful affect on every FTX and Alameda.
What we seen:
There have been large FTT transactions between FTX, Alameda, and Genesis Shopping for and promoting:
In September 2021, there have been frequent inflows and outflows from FTX and Alameda into Genesis Shopping for and promoting. First, we seen an increase in sizable deposits from FTX to Genesis, adopted by a serious change of FTT tokens from Genesis to Alameda’s FTX take care of.
It may probably be doable that FTX despatched FTT to Genesis with the intention for the FTT to be used as collateral for a mortgage to Alameda. Nonetheless, if this assumption was true then why did Genesis ship Alameda the 20m FTT ($1.6b) as a substitute of completely different, additional liquid tokens? Such an prevalence contradicts the logic that FTT was meant as collateral on account of its low liquidity.
Then, in December 2021, Alameda despatched an enormous FTT deposit to Genesis Shopping for and promoting pockets, totaling roughly 38m FTT or $1.7b on the time:
What this would possibly suggest:
Alameda might have each tried to advertise some FTT OTC to Genesis, or tried to make use of the transferred FTT as collateral for a mortgage from Genesis. Nonetheless, as Genesis is a centralized platform, we’re unable to seek out out this primarily using our on-chain info sources.
Furthermore, explicit outflows from centralized platforms akin to Genesis are exhausting to trace on-chain, due to this fact, it is tough to pinpoint exactly how rather a lot Alameda had doubtlessly borrowed.
Alameda was moreover seen to be using FTT as collateral to borrow funds on DeFi platforms akin to Abracadabra Money (MIM), though most likely on a rather a lot smaller scale as compared with their interactions with CeFi lenders akin to Genesis.
The on-chain info for FTT to this point hints on the next approach:
Nonetheless, by utilizing this system – taking out loans with FTT as collateral and using the mortgage to make extra investments – would have put them efficiently in a leveraged prolonged place.
FTT would have been a central weak spot for Alameda and FTX, with worth drops posing a extremely precise menace. The reasonably skinny liquidity as compared with entire present would have made large market product sales very dangerous (e.g. by liquidation of Alameda’s borrowing positions, the chapter of firms that non-public a complete lot of FTT, or “dumping” by completely different large holders like Binance).
Whereas this system may have labored correctly inside the bull market of 2021, it might need turned bitter when markets started to go in the direction of their favor, significantly within the course of the Would possibly/June 2022 crash:
Supplied that important elements of Alameda’s stability sheet had consisted of illiquid belongings, Alameda may have confronted vital liquidity challenges within the course of the Would possibly/June 2022 interval.
With the UST de-peg and the best way the situation had unfolded, many entities have been adversely impacted then. For full safety of how the UST de-peg unfolded and the entities involved, our crew had coated the situation in-depth proper right here.
The following contagion took down 3AC and Celsius in mid-June 2022 which we had coated on this report; every have been debtors to Genesis (who may doubtlessly have had publicity to Alameda based on their on-chain interactions involving the FTT token).
What we seen:
Breaking down the chain of events, this generally is a temporary run-down of what we had seen on-chain:
Between June 9-23, Alameda acquired an enormous inflow of FTT from 5 quite a few entities: Fund:0xf155, Huobi, Genesis Shopping for and promoting OTC, Extreme Stability, and Found on Avalanche.
June 9
Extreme Stability acquired 2.7m FTT ($78m) from Celsius: Pockets, which was despatched to Alameda FTX deposit.
June 10
Extreme Stability acquired one different 1.6m FTT ($45.6m) from Celsius: Pockets, which was moreover despatched to Alameda’s FTX deposit. The spike of FTT inflow to Extreme Stability pockets was evident on every June 9 and June 10 (as seen inside the screenshot beneath).
June 13
Extreme Stability acquired one different 600k FTT ($14.6m) which was despatched to Alameda FTX deposit.
June 14
Fund:0xf155 sometimes receives their FTT tokens from FTX and BlockFi which is shipped out to Alameda’s pockets, along with 27.5m ($631m) FTT from FTX which was then immediately despatched once more to FTX.
Genesis Shopping for and promoting: OTC desk despatched 3.7m FTT ($89m) to Alameda FTX deposit.
June 15
Huobi despatched a whole of 788k FTT ($18.9m) to Alameda FTX deposit.
June 16
Fund: 0xf155 acquired 14m FTT ($326m) and it was despatched on to Alameda FTX deposit.
June 17
Alameda FTX deposit acquired 6.2m FTT ($151m) from Genesis Shopping for and promoting: OTC desk and 18m FTT ($450m) from Fund: 0xf155, which that that they had acquired earlier that day.
June 18
Fund: 0xf155 despatched 27m FTT ($631m) to Alameda FTX deposit.
June 20
Genesis Shopping for and promoting: OTC desk despatched a whole of 13.6m FTT ($364m) to Alameda FTX deposit.
June 21
Found on Avalanche despatched 2.3m FTT ($63m) to Alameda FTX deposit.
June 22
Alameda FTX deposit acquired 408k FTT ($11m) from Extreme Stability and 249k FTT ($6m) from Found on Avalanche.
June 23
Genesis Shopping for and promoting: OTC desk despatched 14.5m FTT ($381m) to Alameda FTX deposit.
June 29
Huobi sends the largest selection of FTT to Alameda FTX deposits given that Terra / UST catastrophe. A whole of 18.4m FTT ($47.2m) was transferred.
June 14 – July 1
Between June 14 and July 1, Genesis despatched a whole of 56.6m FTT ($1.4b) to Alameda’s FTX Deposit. The quite a few on-chain change volumes may advocate that Genesis was doubtlessly a key lender to Alameda.
Definitely, if Alameda had liquidity factors, they could have been in a extremely tight spot with restricted selections for orderly liquidating its belongings to fulfill capital requirements.
With lenders sometimes being cautious after the 3AC catastrophe, borrowing immediately from FTX may have appeared just like the one easy lifeline to stay away from chapter:
In response to the most recent report by New York Cases on How Sam Bankman-Fried’s Crypto Empire collapsed, Alameda’s CEO confirmed that “over the most recent months, Alameda had taken out loans and used the money to make VC investments, amongst completely different expenditures.”
Alameda CEO moreover confirmed that “throughout the time the crypto markets crashed this spring, lenders moved to recall these loans nonetheless the funds that Alameda spent was not merely accessible.” Consequently, Alameda resorted to FTX’s purchaser funds to make the funds.
Did Alameda really get hold of an FTT-backed mortgage from FTX?
We checked out FTT deposits from Alameda onto FTX which can have been posted as collateral, along with non-FTT outflows from FTX to Alameda.
What we seen:
There have been large internet FTT inflows from Alameda to FTX all through mid-June, coinciding with the 3AC collapse, totaling 163m FTT, worth spherical $4b on the time.
It is troublesome to appropriately attribute outflows from centralized platforms into entities on-chain, and a number of of these funds may have circled once more to Alameda immediately or by means of a third get collectively and once more to FTX as soon as extra. Subsequently, the web values displayed inside the chart may doable be larger than the exact internet inflow.
A take a look at FTX’s individual fund pockets reveals, nonetheless, that the soundness on FTX rose from 14m FTT to 54m FTT, an increase of 40m FTT, ~$1.2b from mid-June to mid-July, most of which can be attributed to Alameda.
What this would possibly suggest:
Alameda deposited as rather a lot as ~$4b (based on mapped internet inflows) worth of FTT tokens on FTX between early June and July, with the peak being within the course of the 3AC collapse inside the week of 12 June 2022.That’s in line with the interview from Reuters with a quantity of people close to Bankman-Fried, revealing a $4b mortgage from FTX to Alameda backed by FTT tokens, Robinhood shares, and completely different belongings.
The question of whether or not or not FTX equipped funds to Alameda, cannot be conclusively answered by on-chain info alone.
FTX might have despatched the funds to any recipient, along with the creditor immediately, in any token, on (almost) any chain along with equipped the funds absolutely off-chain.
Furthermore, having a look at pockets stability modifications is inconclusive as correctly.
As for the FTX pockets balances, many withdrew funds from the commerce all through these turbulent cases, leading to extreme fluctuations inside the entire stability. Furthermore, it is unclear what the exact stability of funds must have been, so determining a doable delta may also be not an alternative.
What may probably be seen have been quite a few token flows between FTX and Alameda with values ranging from tens of a whole bunch to tens of 1000’s and 1000’s in USD value. Whereas we did observe a pair of unusually large transactions with transaction values inside the a complete bunch of 1000’s and 1000’s in USD value, we did not have sufficient proof to triangulate and deem these transactions to be “suspicious” or to completely once more the hypothesis.
Nonetheless, it stays a thriller as to what was the intention of these following large transactions.
We summarized the events that prompted the “death-spiral” of every FTX and Alameda:
Sept 28
Alameda acquired 174m FTT ($4.1b) from the FTT ICO Contract and despatched it to the FTX Deployer. This would possibly each have been related to the “FTX mortgage in Would possibly / June” or FTX having to say FTT tokens by Alameda’s pockets as a result of of the inter-linked relationship between FTX and Alameda.
All withdrawals from the FTT agency tokens vesting contract ought to endure this Alameda pockets because it’s declared the one beneficiary from the start (see Appendix). Nonetheless, them withdrawing your complete remaining tokens and sending them to FTX Deployer leaves a bitter type in gentle of the mortgage settlement.
Oct 31- 1 Nov
An unusual report of regular stablecoin transfers from FTX Worldwide and FTX US to Alameda’s Circle, Binance and FTX pockets was seen. These stablecoins included USDC, BUSD, TUSD,PAX,TUSD and amounted to an entire of $388m USD.
Nov 2
CoinDesk releases a report on Alameda’s stability sheet. It revealed that $5.8b of the $14.6b belongings on Alameda’s stability sheet have been reportedly in FTT and completely different Solana ecosystem tokens. The overwhelming majority of internet equity in Alameda’s enterprise was actually FTX’s private centrally-controlled token, FTT.
Nov 6
Alameda CEO makes a press launch on the soundness sheet report from Coindesk and clarifies that Alameda had >$10b of belongings that weren’t mirrored inside the piece. She would not clarify liabilities that weren’t listed inside the report. The Tweet has since been deleted, and we weren’t succesful of completely verify her declare on-chain.
Binance CEO publicizes that they’ve decided to liquidate the remaining FTT on their books, worth ~$584m in FTT.
Alameda CEO gives to OTC buy all of Binance’s FTT holdings for $22 per token, leading to speculation that Alameda may have had loans that may have in another case been liquidated if the worth of FTT falls beneath $22. This Tweet has since been deleted.
The analysis of acknowledged Alameda wallets on the Ethereum chain steered that Alameda’s holdings on the Ethereum chain have been roughly valued at $21m on 6 Nov 2022 (based on accessible Nansen info) .
Scrutiny of the on-chain info revealed that it was extraordinarily unlikely that Alameda had the liquidity to purchase Binance’s FTT when Caroline tweeted publicly on 2 Nov 2022. So then, what was the motivation behind Caroline’s public present to purchase Binance’s FTTs?
Pockets balances obtained are based on accessible Nansen info. Exact pockets balances may be larger (e.g. would not take into account LP tokens and/or Alameda’s balances on CEXs)
Binance CEO reinforces a press launch on liquidating their FTT holdings. There was no on-chain train to help this switch on the time at which the assertion was made.FTX CEO responded by clarifying that FTX is solvent, stating that “FTX is okay, belongings are super.” This Tweet has now been deleted.
Nov 7
Markets resort to panic mode. Nansen’s monitoring of the 7-day stablecoin flows confirmed an online inflow of $411.5m deposited into Binance, with an online outflow of $451.1m in withdrawals from FTX in that interval.
Furthermore, our on-chain examination dropped at consideration a listing of (unusually) large withdrawals earlier to FTX’s collapse.
Entities who withdrew important portions 24 hours sooner than withdrawals have been halted:
The immense sell-pressure of FTT meant that the token lastly broke lower than $22 per token.
Nov 8
FTX appeared to have paused withdrawals as reported by The Block. All through this period, FTX despatched 92m ($37m) of BIT to 🤓 Alameda Evaluation: 0x84d.
FTX CEO shared that Binance would enter proper right into a strategic transaction with FTX, of which Binance CEO launched a non-binding Letter of Intent to completely buy FTX and help cowl its liquidity crunch.
It appeared that Binance was leaning in route of scrapping FTX rescue takeover after taking first take a look at books. At this degree inside the timeline, FTX US had despatched $10m USDT to Alameda. Alameda Evaluation then despatched 130k FTT (~$715k) to 🏦 Binance: Alameda Deposit. Lastly, FTX US despatched 2,262 WBTC ($41m) to 🤓 Alameda Evaluation: WBTC which was later despatched to WBTC: Controller.
It is fascinating to note that whereas FTX Worldwide had halted withdrawals, FTX US nonetheless managed to change a big amount of WBTC to Alameda. Alameda CEO moreover implied that solely the FTX Worldwide entity was coping with liquidity factors and that FTX US was unaffected.
Nov 9
The Wall Avenue Journal reported that Binance had walked away from the FTX deal.
Nov 11
FTX filed for Chapter 11 chapter proceedings, with the FTX CEO resigning
In response to an unverified insider provide that was leaked on Twitter as of 16 Nov, “Caroline painted Alameda and FTX getting liquidated as a doable event reasonably than a tail event.”
Moreover, FTX’s native token FTT was moreover a spotlight contributing to the fallout. The low float and fastened buy pressure from FTX implied that the one issue that might doubtlessly set off the FTT worth to go down was a big promote pressure for the token.
Whereas the Coindesk report first garnered most people’s consideration to the connection between Alameda & FTX, the “bank-run” on FTX had moreover coincided with the announcement that Binance was making an attempt to liquidate the remaining FTT on their books.
Piecing collectively the gadgets from our on-chain investigation, it was evident that the Luna/Terra collapse revealed a deep flaw between Alameda and FTX’s muddled relationship. There have been important FTT outflows from Alameda to FTX throughout the Terra-Luna/ 3AC situation.
Primarily based totally on the data, the entire $4b FTT outflows from Alameda to FTX in June and July might most likely have been the provision of collateral that was used to secure the loans (worth as a minimum $4b) in Would possibly / June that was revealed by a quantity of people close to Bankman-Fried in a Reuters interview.
We moreover seen barely unusual large regular outflows of stablecoin tokens from FTX to Alameda’s wallets all through that time interval.
Given the cascading influence of the Luna collapse, many corporations like 3AC have been liquidated inflicting a contagion all through the crypto lending market. Whereas our on-chain investigation did not immediately verify that individual funds have been being siphoned from FTX to Alameda in makes an try and “save” them from liquidation, the unusually large FTT inflows from FTX post-Luna/ 3AC hint at a plausible case.
From this degree on, the intermingled relationship between Alameda and FTX grew to turn out to be additional troubling, supplied that purchaser funds have been moreover inside the equation.
Alameda was on the stage the place survival was its chosen priority, and if one entity collapses, additional trouble might start brewing for FTX. Given how intertwined these entities have been set as a lot as perform, along with the over-leverage of collateral, our post-mortem on-chain analysis hints that the eventual collapse of Alameda (and the following affect on FTX) was, perhaps, inevitable.
The sudden fallout of FTX had induced a rising concern all through the crypto market contributors – every patrons and retailers alike. If one thing, this case solely strengthens the need for additional transparency in crypto. Our crew at Nansen Portfolio have compiled real-time dashboards that showcase crypto exchanges’ proof-of-reserves.
Whereas the report of asset holdings is non-exhaustive, that is the 1st step to holding crypto contributors additional accountable. Hyperlink to proof-of-reserves per entity by Nansen could also be found proper right here.
All through our investigation we well-known a set of wallets which is able to or won’t be Alameda/ FTX’s addresses. Assertion of on-chain actions and interactions hint at a extreme probability that these wallets had an indirect publicity with Alameda. For a lot of who’re all in favour of exploring these wallets, we now have equipped a brief description of the associated actions.
To get a larger understanding of our pockets labels, be taught additional proper right here. 350m minted in entire and distributed in late July 2019 by Deployer, from there:
Judging by the amount, these are almost undoubtedly the FTX agency and FTX agency administrated tokens. The Alameda take care of being the one beneficiary of the vesting contract is a sign of a extremely shut connection between the companies. If the Alameda pockets receives FTT from the contract they doable actually belong to FTX. They usually forward them ultimately and do nothing with them.
5m once more to FTX Deployer which ended up on FTX deposits 0xa5d and 0x23b, may probably be Advisor tokens or a combination of advisor and early patrons (doable)
10m to Token Millionaire: 0x4aa (sits there till proper this second)
20m to FTX Deposit:0xa5d (related one the FTX Deployer deposited in, doable affiliated with FTX and/or Alameda), tokens doable distributed to FTT early patrons, distributed by means of the FTX platform
40m to token Millionaire: 0xef9, who moreover acquired 9m from Alameda throughout the same time
27.5m to EIP1559 individual: 0x209 who sends:
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