Is Crypto Whale Alameda Research in Financial Trouble?

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

Operating the Numbers on Alameda’s Steadiness 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 belongings on June 30, in opposition to $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 trade, FTX.

Alameda is named one among crypto’s largest whales, however a detailed have 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. Apparently, 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 presently 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 in keeping with FTX’s official website, there are presently 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 value of a token that it will possibly’t promote with out cratering its worth. 

There are additionally different factors of concern surrounding the corporate’s steadiness 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 belongings. Since these have been the tokens talked about by title on the steadiness sheet, it could 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 certain to turn into 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 based mostly on CoinDesk reporting. Second, even when these numbers have been appropriate on the finish of June, Alameda has had 4 months to make modifications to its holdings. Lastly, Alameda’s monetary statements could comprise unknown data that places the agency’s place in a significantly better mild.

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

In fact, the scenario 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 good relationship with FTX. Given FTX’s historical past of providing bailouts this 12 months, it’s not onerous to think about the trade stepping in to assist Alameda if wanted. 

However the agency’s obvious monetary difficulties shed new mild on Bankman-Fried’s cavalier perspective in the course of the summer season. All through Might and June, brutal market situations 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 rapidly provided to bail out struggling corporations, citing the necessity to reaffirm buyers’ belief within the markets. By his actions, Bankman-Fried earned a fame as crypto’s lender of final resort; he even proclaimed in July that he had over $2 billion able to deploy to stop additional contagion.

This reported steadiness sheet, nevertheless, could also be telling a unique story. If Alameda was caught in illiquid tokens because the market was tanking, there’s a chance 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 energy might have been a method to reassure Alameda collectors—and stop them from asking the agency to pay again its loans. 

Editor’s observe: 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 reality 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.