Is Crypto Whale Alameda Research in Financial Trouble?

Based on new reporting, Alameda Analysis’s steadiness sheet was largely composed of illiquid FTT and SOL tokens final summer season. 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, based on 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 belongings 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 greatest whales, however an in depth have a look at the numbers quoted within the CoinDesk article suggests that the agency could also be in a way more precarious state of affairs than onlookers would have anticipated.

Based on 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 embrace $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 the moment has over $6.11 billion in FTT on its books, $5.82 billion of which it counts as belongings. 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 without doubt one of the largest cash within the crypto ecosystem, however based on FTX’s official website, there are at the moment 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 worried. It’s holding $5.82 billion price of a token that it may well’t promote with out cratering its worth. 

There are additionally different factors of concern surrounding the corporate’s steadiness sheet. Based on the report, Alameda counted Solana-based tokens like SOL, SRM, FIDA, MAPS, and OXY amongst its $3.37 billion in crypto belongings. Since these had been the tokens talked about by title on the steadiness sheet, it will be honest to imagine they constituted Alameda’s greatest 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 are sure to grow to be extremely illiquid. If these tokens are consultant of Alameda’s mixed crypto holdings, the agency would battle to money in on its $3.37 billion in crypto belongings if it ever wished to.

Crypto Briefing’s Take

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

However, taking these numbers at face worth, evidently Alameda is in a troublesome state of affairs. The agency has $8 billion in liabilities, nevertheless it appears obvious from the numbers that it doesn’t have sufficient belongings to pay them off. 

In fact, the state of affairs is more likely to be extra complicated. 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 mild on Bankman-Fried’s cavalier angle throughout the summer season. 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 provided to bail out struggling corporations, citing the necessity to reaffirm traders’ belief within the markets. By his actions, Bankman-Fried earned a popularity 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 steadiness sheet, nevertheless, could also be telling a special 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 state of affairs, stabilizing the market, decreasing panic, and exhibiting power might have been a technique to reassure Alameda collectors—and forestall them from asking the agency to pay again its loans. 

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

Disclosure: On the time of writing, the creator of this piece owned BTC, ETH, and several other different crypto belongings.