Nansen’s analysis crew dives into the collapse of Alameda and FTX utilizing blockchain analytics
It began with CoinDesk reporting that “There are extra 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 Analysis’s CEO, Caroline Ellison, supplied to purchase up Binance’s FTX Tokens (FTT) at $22 per token. What adopted was undoubtedly one among crypto’s craziest occasions – the collapse of FTX and Alameda.
So how did this occur? Did the de-pegging of TerraUSD, Luna’s failure, and the chapter of 3AC all result in FTX and Alameda’s fall from grace?
Or was it mismanagement of danger and misuse of consumers’ funds all alongside?
Nansen has compiled an in-depth evaluation utilizing on-chain information to piece collectively the fallen dominos of FTX and Alameda. The place doable, we aspire to present an goal account backed by on-chain proof.
Our examine doesn’t cowl potential off-chain occasions. This analysis leverages Nansen’s labeling heuristics to trace identified wallets of the concerned entities and confirm their actions on-chain, to make sense of what really occurred in the course of the FTX-Alameda debacle.
To place it merely, our on-chain evaluation makes use of data from a blockchain ledger to find out the sequence of occasions and fund balances associated to the autumn of FTX and Alameda. Analysis Analysts look at the transaction information and crypto pockets actions of the concerned entities, two main information sources helpful when attempting to piece collectively what had occurred.
Utilizing a confirmed methodology that we had beforehand used for different on-chain analyses (TerraUSD de-peg, stETH de-peg), we framed our examine utilizing a grounded principle method the place an inventory of pockets balances and transaction volumes processed by these wallets are on the core of this examine.
By means of a evaluation of gray literature comparable to social media discussion board threads, media protection, and podcasts, we narrowed the scope of our examine to give attention to transactional information within the following timeframes:
We additionally paid shut consideration to a set of pockets addresses which we now have recognized as both FTX’s or Alameda’s, you’ll be able to see the record of addresses and labels within the Appendix Part.
The report is formatted in three distinct sections. Half 1 acts as a prologue, offering the context to navigate the connection between FTX, Alameda, and their interactions with the FTX Token (FTT). Half 2 particulars the interplay and entanglement between FTX and Alameda by among the vital occasions within the latest market cycle. Lastly, Half 3 zooms in on the on-chain information, primarily between 2 November and 9 November.
We try and triangulate in style (on-line) narratives with the variable on-chain footprints to make sense of FTX’s and Alameda’s positions and holdings throughout this era. It’s no secret that Alameda and FTX have been each based by SBF, and had ongoing partnerships. Nonetheless, it’s rumored that FTX was solely actually began to boost funds for Alameda and the 2 colluded from the very starting.
We leveraged on-chain proof to attract doable interpretations.
It’s no secret that Alameda was one among, if not the earliest, liquidity suppliers on FTX. Nonetheless, this poses a query of how concerned the 2 entities have been.
What was noticed:
Alameda’s pockets interacted with FTX earlier than it had even launched in Might 2019; other than different CEX addresses, it was the one clearly identifiable counterparty.
What it may imply:
Though comparatively low in quantity (~$160k), this strongly means that both Alameda was closely concerned in FTX’s inception or there was no clear separation between Alameda and FTX then – and maybe, even each.
FTT is a utility token for the FTX platform, it doesn’t entitle customers to part of the platform income or characterize a share in FTX. It’s not backed nor does it give management over governance selections or FTX’s treasury.
What we noticed:
Two days earlier than the official itemizing on FTX on 29 July 2019, Alameda acquired 5m FTT in three transactions instantly from the FTX Deployer (who minted the FTT) to their FTX account.
Moreover, 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 lot of FTT in circulation on the time.Roughly per week after the itemizing, 5m FTT was despatched again to the FTX Deployer on 5 August 2019.
What it may imply:
The 5m FTT returned to the FTX Deployer are more likely to be the identical ones deposited into the Alameda FTX account.
An optimistic interpretation could be that Alameda was concerned within the market-making of FTT tokens. This principle, nevertheless, doesn’t clarify why the funds have been despatched again solely after a couple of days.
A pessimistic interpretation could be that Alameda profited off the ICO contributors by promoting the tokens earlier than different buyers’ tokens have been unlocked and shopping for them again cheaper afterward to return to FTX.
What we noticed:
Utilizing the official token distribution from the FTX docs and evaluating it to on-chain actions ranging from the primary token actions after minting in late July 2019 till December 2020, a possible state of affairs may be devised for the early distribution of FTT:
Observing the above parameters, we famous some key observations:
What it may imply:
Our observations raised additional questions: Why was there a necessity for FTX to have such a concentrated provide of tokens? Why would they select a pockets (Alameda’s) because the beneficiary for the FTT firm tokens, that’s not instantly managed by FTX themselves?
There was, nevertheless, a limitation in using on-chain information to floor solutions to those questions. Subsequently, we centered on what may be answered by on-chain information as an alternative.
Early transaction exercise of FTT steered that:
Quick ahead to the bull market of 2021, the FTT token noticed a meteoric rise, roughly 800x from the seed value of $0.10 to $84 at ATH in summer season 2021.
The rise within the value of FTT noticed the absolutely diluted valuation of FTT reached nearly $30b on the all-time highs – most of which have been owned by Alameda and FTX.
Regardless that the tokens are technically liquid, these portions would have been inconceivable to liquidate for Alameda within the open market. Alameda promoting may trigger extensive downward swings in value, and in flip devalue their very own remaining positions in addition to these of the opposite holders, with FTX being by far the biggest.
This was a gordian knot for Alameda’s FTT holdings and created an extra co-dependency between Alameda and FTX.
With Alameda not having the ability to promote its FTT holdings in massive portions, and FTT not producing sufficient liquid income, the potential choices for them to acquire liquidity utilizing FTT have been:
Notice that lots of the methods to entry liquidity utilizing FTT have been already applied by FTX from the beginning, with FTX customers because the counterparty. Whereas OTC promoting and liquidity provision are comparatively much less dangerous, borrowing towards FTT is taken into account dangerous as a liquidation occasion would have a big destructive influence on each FTX and Alameda.
What we noticed:
There have been massive FTT transactions between FTX, Alameda, and Genesis Buying and selling:
In September 2021, there have been common inflows and outflows from FTX and Alameda into Genesis Buying and selling. First, we noticed a rise in sizable deposits from FTX to Genesis, adopted by a major switch of FTT tokens from Genesis to Alameda’s FTX deal with.
It could possibly be doable that FTX despatched FTT to Genesis with the intention for the FTT for use 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 an alternative of different, extra 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 a big FTT deposit to Genesis Buying and selling pockets, totaling roughly 38m FTT or $1.7b on the time:
What this might imply:
Alameda may have both tried to promote 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 find out this primarily utilizing our on-chain information sources.
Moreover, particular outflows from centralized platforms comparable to Genesis are exhausting to hint on-chain, therefore, it’s difficult to pinpoint precisely how a lot Alameda had doubtlessly borrowed.
Alameda was additionally noticed to be utilizing FTT as collateral to borrow funds on DeFi platforms comparable to Abracadabra Cash (MIM), although probably on a a lot smaller scale in comparison with their interactions with CeFi lenders comparable to Genesis.
The on-chain information for FTT to date hints on the following technique:
Nonetheless, by using this technique – taking out loans with FTT as collateral and utilizing the mortgage to make additional investments – would have put them successfully in a leveraged lengthy place.
FTT would have been a central weak spot for Alameda and FTX, with value drops posing a really actual menace. The moderately skinny liquidity in comparison with whole provide would have made massive market gross sales very harmful (e.g. by liquidation of Alameda’s borrowing positions, the chapter of corporations that personal a whole lot of FTT, or “dumping” by different massive holders like Binance).
While this technique could have labored properly within the bull market of 2021, it might have turned bitter when markets began to go towards their favor, particularly in the course of the Might/June 2022 crash:
Provided that vital parts of Alameda’s stability sheet had consisted of illiquid belongings, Alameda could have confronted critical liquidity challenges in the course of the Might/June 2022 interval.
With the UST de-peg and the way the scenario had unfolded, many entities have been adversely impacted then. For full protection of how the UST de-peg unfolded and the entities concerned, our crew had coated the scenario in-depth right here.
The following contagion took down 3AC and Celsius in mid-June 2022 which we had coated on this report; each have been debtors to Genesis (who could doubtlessly have had publicity to Alameda primarily based on their on-chain interactions involving the FTT token).
What we noticed:
Breaking down the chain of occasions, this can be a brief run-down of what we had noticed on-chain:
Between June 9-23, Alameda acquired a big influx of FTT from 5 numerous entities: Fund:0xf155, Huobi, Genesis Buying and selling OTC, Excessive Stability, and Discovered on Avalanche.
Excessive Stability acquired 2.7m FTT ($78m) from Celsius: Pockets, which was despatched to Alameda FTX deposit.
Excessive Stability acquired one other 1.6m FTT ($45.6m) from Celsius: Pockets, which was additionally despatched to Alameda’s FTX deposit. The spike of FTT influx to Excessive Stability pockets was evident on each June 9 and June 10 (as seen within the screenshot beneath).
Excessive Stability acquired one other 600k FTT ($14.6m) which was despatched to Alameda FTX deposit.
Fund:0xf155 typically receives their FTT tokens from FTX and BlockFi which is shipped out to Alameda’s pockets, together with 27.5m ($631m) FTT from FTX which was then instantly despatched again to FTX.
Genesis Buying and selling: OTC desk despatched 3.7m FTT ($89m) to Alameda FTX deposit.
Huobi despatched a complete of 788k FTT ($18.9m) to Alameda FTX deposit.
Fund: 0xf155 acquired 14m FTT ($326m) and it was despatched on to Alameda FTX deposit.
Alameda FTX deposit acquired 6.2m FTT ($151m) from Genesis Buying and selling: OTC desk and 18m FTT ($450m) from Fund: 0xf155, which that they had acquired earlier that day.
Fund: 0xf155 despatched 27m FTT ($631m) to Alameda FTX deposit.
Genesis Buying and selling: OTC desk despatched a complete of 13.6m FTT ($364m) to Alameda FTX deposit.
Discovered on Avalanche despatched 2.3m FTT ($63m) to Alameda FTX deposit.
Alameda FTX deposit acquired 408k FTT ($11m) from Excessive Stability and 249k FTT ($6m) from Discovered on Avalanche.
Genesis Buying and selling: OTC desk despatched 14.5m FTT ($381m) to Alameda FTX deposit.
Huobi sends the biggest variety of FTT to Alameda FTX deposits for the reason that Terra / UST disaster. A complete of 18.4m FTT ($47.2m) was transferred.
June 14 – July 1
Between June 14 and July 1, Genesis despatched a complete of 56.6m FTT ($1.4b) to Alameda’s FTX Deposit. The numerous on-chain switch volumes could recommend that Genesis was doubtlessly a key lender to Alameda.
Certainly, if Alameda had liquidity points, they may have been in a really tight spot with restricted choices for orderly liquidating its belongings to satisfy capital necessities.
With lenders typically being cautious after the 3AC disaster, borrowing instantly from FTX could have appeared like the one simple lifeline to keep away from chapter:
In response to the newest report by New York Instances on How Sam Bankman-Fried’s Crypto Empire collapsed, Alameda’s CEO confirmed that “over the latest months, Alameda had taken out loans and used the cash to make VC investments, amongst different expenditures.”
Alameda CEO additionally confirmed that “across the time the crypto markets crashed this spring, lenders moved to recall these loans however the funds that Alameda spent was now not simply accessible.” Consequently, Alameda resorted to FTX’s buyer funds to make the funds.
Did Alameda actually obtain an FTT-backed mortgage from FTX?
We checked out FTT deposits from Alameda onto FTX which may have been posted as collateral, in addition to non-FTT outflows from FTX to Alameda.
What we noticed:
There have been huge web FTT inflows from Alameda to FTX throughout mid-June, coinciding with the 3AC collapse, totaling 163m FTT, value round $4b on the time.
It’s troublesome to appropriately attribute outflows from centralized platforms into entities on-chain, and a few of these funds may need circled again to Alameda instantly or through a 3rd get together and again to FTX once more. Subsequently, the online values displayed within the chart could possible be greater than the precise web influx.
A have a look at FTX’s person fund pockets reveals, nevertheless, that the stability on FTX rose from 14m FTT to 54m FTT, a rise of 40m FTT, ~$1.2b from mid-June to mid-July, most of which may be attributed to Alameda.
What this might imply:
Alameda deposited as a lot as ~$4b (primarily based on mapped web inflows) value of FTT tokens on FTX between early June and July, with the height being in the course of the 3AC collapse within the week of 12 June 2022.That is in keeping with the interview from Reuters with a number of individuals near Bankman-Fried, revealing a $4b mortgage from FTX to Alameda backed by FTT tokens, Robinhood shares, and different belongings.
The query of whether or not FTX supplied funds to Alameda, can’t be conclusively answered by on-chain information alone.
FTX may have despatched the funds to any recipient, together with the creditor instantly, in any token, on (nearly) any chain in addition to supplied the funds fully off-chain.
Moreover, taking a look at pockets stability modifications is inconclusive as properly.
As for the FTX pockets balances, many withdrew funds from the trade throughout these turbulent instances, resulting in excessive fluctuations within the whole stability. Moreover, it’s unclear what the precise stability of funds ought to have been, so figuring out a possible delta can also be not an choice.
What could possibly be seen have been numerous token flows between FTX and Alameda with values starting from tens of hundreds to tens of thousands and thousands in USD worth. Whereas we did observe a couple of unusually massive transactions with transaction values within the a whole bunch of thousands and thousands in USD worth, we didn’t have adequate proof to triangulate and deem these transactions to be “suspicious” or to totally again the speculation.
Nonetheless, it stays a thriller as to what was the aim of those following massive transactions.
We summarized the occasions that prompted the “death-spiral” of each FTX and Alameda:
Alameda acquired 174m FTT ($4.1b) from the FTT ICO Contract and despatched it to the FTX Deployer. This might both have been associated to the “FTX mortgage in Might / June” or FTX having to assert FTT tokens by Alameda’s pockets because of the inter-linked relationship between FTX and Alameda.
All withdrawals from the FTT firm tokens vesting contract should undergo this Alameda pockets as it’s declared the one beneficiary from the beginning (see Appendix). Nonetheless, them withdrawing the entire remaining tokens and sending them to FTX Deployer leaves a bitter style in mild of the mortgage settlement.
Oct 31- 1 Nov
An uncommon record of steady stablecoin transfers from FTX Worldwide and FTX US to Alameda’s Circle, Binance and FTX pockets was noticed. These stablecoins included USDC, BUSD, TUSD,PAX,TUSD and amounted to a complete of $388m USD.
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 different Solana ecosystem tokens. The vast majority of web fairness in Alameda’s enterprise was really FTX’s personal centrally-controlled token, FTT.
Alameda CEO makes a press release on the stability sheet report from Coindesk and clarifies that Alameda had >$10b of belongings that weren’t mirrored within the piece. She doesn’t make clear liabilities that weren’t listed within the report. The Tweet has since been deleted, and we weren’t capable of absolutely confirm her declare on-chain.
Binance CEO publicizes that they’ve determined to liquidate the remaining FTT on their books, value ~$584m in FTT.
Alameda CEO provides to OTC purchase all of Binance’s FTT holdings for $22 per token, resulting in hypothesis that Alameda could have had loans that might have in any other case been liquidated if the value of FTT falls beneath $22. This Tweet has since been deleted.
The evaluation of recognized 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 (primarily based on accessible Nansen information) .
Scrutiny of the on-chain information revealed that it was extremely unlikely that Alameda had the liquidity to buy Binance’s FTT when Caroline tweeted publicly on 2 Nov 2022. So then, what was the motivation behind Caroline’s public provide to buy Binance’s FTTs?
Pockets balances obtained are primarily based on accessible Nansen information. Precise pockets balances could also be greater (e.g. doesn’t consider LP tokens and/or Alameda’s balances on CEXs)
Binance CEO reinforces a press release on liquidating their FTT holdings. There was no on-chain exercise to assist this transfer on the time at which the assertion was made.FTX CEO responded by clarifying that FTX is solvent, stating that “FTX is ok, belongings are tremendous.” This Tweet has now been deleted.
Markets resort to panic mode. Nansen’s monitoring of the 7-day stablecoin flows confirmed a web influx of $411.5m deposited into Binance, with a web outflow of $451.1m in withdrawals from FTX in that interval.
Moreover, our on-chain examination dropped at consideration an inventory of (unusually) massive withdrawals previous to FTX’s collapse.
Entities who withdrew vital quantities 24 hours earlier than withdrawals have been halted:
The immense sell-pressure of FTT meant that the token finally broke decrease than $22 per token.
FTX appeared to have paused withdrawals as reported by The Block. Throughout this era, FTX despatched 92m ($37m) of BIT to 🤓 Alameda Analysis: 0x84d.
FTX CEO shared that Binance would enter right into a strategic transaction with FTX, of which Binance CEO introduced a non-binding Letter of Intent to totally purchase FTX and assist cowl its liquidity crunch.
It appeared that Binance was leaning in direction of scrapping FTX rescue takeover after taking first look at books. At this level within the timeline, FTX US had despatched $10m USDT to Alameda. Alameda Analysis then despatched 130k FTT (~$715k) to 🏦 Binance: Alameda Deposit. Lastly, FTX US despatched 2,262 WBTC ($41m) to 🤓 Alameda Analysis: WBTC which was later despatched to WBTC: Controller.
It’s fascinating to notice that whereas FTX Worldwide had halted withdrawals, FTX US nonetheless managed to switch a large quantity of WBTC to Alameda. Alameda CEO additionally implied that solely the FTX Worldwide entity was dealing with liquidity points and that FTX US was unaffected.
The Wall Avenue Journal reported that Binance had walked away from the FTX deal.
FTX filed for Chapter 11 chapter proceedings, with the FTX CEO resigning
In response to an unverified insider supply that was leaked on Twitter as of 16 Nov, “Caroline painted Alameda and FTX getting liquidated as a possible occasion moderately than a tail occasion.”
Furthermore, FTX’s native token FTT was additionally a focus contributing to the fallout. The low float and fixed purchase strain from FTX implied that the one factor that would doubtlessly set off the FTT value to go down was a large promote strain for the token.
Whereas the Coindesk report first garnered the general public’s consideration to the connection between Alameda & FTX, the “bank-run” on FTX had additionally coincided with the announcement that Binance was trying to liquidate the remaining FTT on their books.
Piecing collectively the items 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 vital FTT outflows from Alameda to FTX across the Terra-Luna/ 3AC scenario.
Based mostly on the information, the whole $4b FTT outflows from Alameda to FTX in June and July may probably have been the availability of collateral that was used to safe the loans (value at the least $4b) in Might / June that was revealed by a number of individuals near Bankman-Fried in a Reuters interview.
We additionally noticed barely uncommon massive steady outflows of stablecoin tokens from FTX to Alameda’s wallets throughout that point interval.
Given the cascading impact of the Luna collapse, many companies like 3AC have been liquidated inflicting a contagion throughout the crypto lending market. Whereas our on-chain investigation didn’t instantly confirm that person funds have been being siphoned from FTX to Alameda in makes an attempt to “save” them from liquidation, the unusually massive FTT inflows from FTX post-Luna/ 3AC trace at a believable case.
From this level on, the intermingled relationship between Alameda and FTX grew to become extra troubling, provided that buyer funds have been additionally within the equation.
Alameda was on the stage the place survival was its chosen precedence, and if one entity collapses, extra bother may begin brewing for FTX. Given how intertwined these entities have been set as much as function, together with the over-leverage of collateral, our autopsy on-chain evaluation hints that the eventual collapse of Alameda (and the ensuing influence on FTX) was, maybe, inevitable.
The sudden fallout of FTX had induced a rising concern throughout the crypto market contributors – each buyers and merchants alike. If something, this case solely strengthens the necessity for extra transparency in crypto. Our crew at Nansen Portfolio have compiled real-time dashboards that showcase crypto exchanges’ proof-of-reserves.
While the record of asset holdings is non-exhaustive, this is step one to holding crypto contributors extra accountable. Hyperlink to proof-of-reserves per entity by Nansen may be discovered right here.
Throughout our investigation we famous a set of wallets which will or will not be Alameda/ FTX’s addresses. Statement of on-chain actions and interactions trace at a excessive chance that these wallets had an oblique publicity with Alameda. For many who are all in favour of exploring these wallets, we now have supplied a short description of the related actions.
To get a greater understanding of our pockets labels, learn extra right here. 350m minted in whole and distributed in late July 2019 by Deployer, from there:
Judging by the quantity, these are nearly definitely the FTX firm and FTX firm administrated tokens. The Alameda deal with being the one beneficiary of the vesting contract is an indication of a really shut connection between the businesses. If the Alameda pockets receives FTT from the contract they possible really belong to FTX. They normally ahead them sooner or later and do nothing with them.
5m again to FTX Deployer which ended up on FTX deposits 0xa5d and 0x23b, could possibly be Advisor tokens or a mixture of advisor and early buyers (possible)
10m to Token Millionaire: 0x4aa (sits there until right this moment)
20m to FTX Deposit:0xa5d (similar one the FTX Deployer deposited in, possible affiliated with FTX and/or Alameda), tokens possible distributed to FTT early buyers, distributed through the FTX platform
40m to token Millionaire: 0xef9, who additionally acquired 9m from Alameda across the similar time
27.5m to EIP1559 person: 0x209 who sends:
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