SBF seeks to probe FTX lawyers’ roles in $200M Alameda loans

October 10, 2023 Coin Telegraph

Alameda

Sam Bankman-Fried’s legal team is seeking permission to cross-examine Gary Wang over FTX lawyers' involvement in Alameda loan approvals.

Sam Bankman-Fried’s legal team is looking for permission to probe the alleged involvement of FTX lawyers in the issuance of $200 million worth of loans from Alameda that were approved by Gary Wang.

As previously reported in the build-up to the highly anticipated trial, an Oct. 1 court ruling provisionally barred Bankman-Fried from apportioning blame to FTX lawyers who were allegedly involved in structuring and approving loans between Alameda and FTX.

United States Judge Lewis Kaplan granted the government’s motion and ruled that Bankman-Fried's legal team would have to request permission to make any mention of FTX lawyers' involvement throughout the trial.

Following the initial cross-examination of former FTX co-founder Gary Wang by the prosecution on Oct. 9, the defense is now seeking permission to question Wang over the alleged involvement of FTX counsel in structuring loans issued to FTX by Alameda.

A letter filed on Oct. 9 highlighted the government’s questioning of Wang over a series of personal loans worth up to $300 million from Alameda that FTX used to fund venture investments. Wang had also used some of the funds to purchase a home in the Bahamas.

During the prosecution's line of inquiry, Wang said that either Bankman-Fried or FTX lawyers had presented him with loans which he was then directed to sign.

Bankman-Fried’s attorneys argue that the prosecution has already established that FTX lawyers were present and involved in structuring and executing the loans and intend to carry out their own line of questioning over the scope of FTX counsel involvement.

A screenshot of the defense's letter requesting permission to question Gary Wang over the involvement of FTX lawyers in the structuring of loans to Alameda and senior executives. Source: Court Listener.

The defense adds that it could potentially introduce promissory notes that memorialized the loans to Wang, who has previously indicated to the prosecution in proffer meetings that he did not suspect FTX lawyers would coerce him to sign illegal agreements:

“Mr. Wang's understanding that these were actual loans - structured by lawyers and memorialized in formal promissory notes that imposed real interest payment obligations - is relevant to rebut the inference that these were simply sham loans directed by Mr. Bankman-Fried to conceal the source of the funds.”

Cointelegraph journalist Ana Paula Pereira is on the ground in New York covering the trial of Bankman-Fried. Her latest report from the Federal District Court in Manhattan highlights the defense's efforts to paint Bankman-Fried as a young entrepreneur who tripped up amid the rapid growth of FTX and Alameda.

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SBF’s Alameda minted $38B USDT to profit off arbitrage trading: Coinbase director

October 10, 2023 Coin Telegraph

Alameda

Coinbase director Conor Grogan has flagged on chain data that highlights massive USDT mints ordered by Sam Bankman-Fried’s Alameda Research in 2021.

Blockchain data flagged by Coinbase director Conor Grogan indicates that Alameda Research redeemed over $38 billion for Tether (USDT) tokens in 2021 despite not having the equivalent assets under management.

Onchain data shows that Alameda was responsible for minting $39.55B of USDT, a number that is 47% of Tether's circulating supply today

A previous report by Protoss estimated the number at around $36.7B; I was able to update these figures with additional wallets I found pic.twitter.com/fYBvGAYlFd
— Conor (@jconorgrogan) October 9, 2023

According to Grogan, the total value of USDT creation was higher than Alameda’s total assets on its books at the height of the wider cryptocurrency market bull run in 2021.

Grogan also suggests that FTX ordered USDT redemptions were likely to have been from Alameda’s tokens, totalling 3.9 billion USDT. The majority of this redemption amount was carried out during the collapse of the Terra Luna algorithmic stablecoin.

In Jan. 2021, former Alameda co-CEO Sam Trabucco weighed in on prevailing reports of significant USDT mints carried out by Tether and gave inside insights into how Alameda profited off arbitrage opportunities relating to the value of USDT to various trading pairs across different exchanges.

BTW, to connect some dots here -- a lot of the people seeking access to a coin like USDT *aren't* doing so via creation. They're often doing so via just sorta buying it in the markets -- and they're buying a LOT, and REALLY aggressively. https://t.co/pKRj3AMJ9D
— Sam Trabucco (@AlamedaTrabucco) January 11, 2021

Trabucco described how the premium in which USDT trades to $1 was typically volatile given that Bitcoin to USDT trades resulted in a slight deficit in basis points when compared to BTC/US dollar trades.

“And note, *these* are the best markets to use to determine where USDT is trading -- the combo of BTC/USDT and BTC/USD markets, e.g., are WAY more liquid than any exchange's USDT/USD market, so the prices from these (even though it's a two-leg trade) matter way more.”

Trabucco went on to explain that other US dollar stablecoins like USD Coin (USDC) had a less volatile premia due to the creation and redemption process involved for USDT. Given that select firms have the ability to create and redeem USDT, most market players acquire and trade USDT from markets themselves and not directly from Tether’s treasury:

“And when USDT gets above $1? A sophisticated firm like Alameda with great setups on all the exchanges and bots to execute more than one leg at a time is gonna want to sell! And we do -- a LOT.”

Trabucco added that Alameda was able to “safely put on big bets” due to its ability to do USDT creations and redemptions when it needed to. The former Alameda CEO described the situation as a “win-win” situation for the trading firm and the stability of USDT's dollar peg:

“Obviously we're making money because we can, e.g., selling above where we create, but we're also bringing the price in line so that when aggro buyers come in, it sticks close to $1.”

As a result, Alameda profited by collecting the premium on arbitrage opportunities through its ability to create USDT tokens. Bankman-Fried himself also chimed in on the debate in 2021, stating that Alameda actively redeemed USDT for US dollars.

It's sort of funny hearing people claim that you can't create/redeem USDT for $.

Like, I don't know what to tell you, you can, and we do. https://t.co/8XthTsk1xr
— SBF (@SBF_FTX) January 12, 2021

Cointelegraph has reached out to Tether to confirm the amount of USDT tokens that had been minted at the request of Alameda.

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Alameda sent $4.1B of FTT tokens to FTX before crash: Nansen report

October 4, 2023 Coin Telegraph

Alameda

Nansen analysts observed “unusual transactions between FTX and Alameda” in the days leading up to FTX’s bankruptcy.

Blockchain data analysts from Nansen have revisited the days leading up to the collapse of FTX, including the transfer of $4.1 billion worth of FTT tokens between the exchange and Alameda Research.

A Nansen report shared with Cointelegraph reveals unique observations from the blockchain analytics firm, highlighting the close relationship between the two companies founded by Sam Bankman-Fried as the former FTX CEO appears in court to face a litany of charges relating to the collapse of the exchange.

The collapse of FTX is widely reported to have been sparked by initial reports that flagged the significant 40% share of Alameda’s $14.6 billion in assets held in FTT tokens in September 2022.

Nansen analysts revealed that they had observed dubious on-chain interactions between FTX and Alameda before these reports came to light. Between Sept. 28 and Nov. 1, Alameda sent $4.1 billion FTT tokens to FTX and several continuous transfers of United States dollar-pegged stablecoins amounting to $388 million.

*Net FTT flow from Alameda to FTX. Source: Nansen*

On-chain data also indicated that FTX held around 280 million FTT tokens (80%) of the total 350 million FTT supply. Blockchain data reflects “considerable” proportions of FTT trading volume amounting to billions of dollars flowing between various FTX and Alameda wallets.

Nansen also highlights that most of the FTT token supply, consisting of company tokens and unsold non-company tokens, was locked in a three-year vesting contract. The lone beneficiary of the contract is an Alameda-controlled wallet, according to the analysts.

Given that the two companies controlled around 90% of the FTT token supply, Nansen suggests that the entities were able to prop up each other’s balance sheets.

The report also suggests that Alameda most likely sold FTT tokens over-the-counter, as well as for collateral for loans from cryptocurrency lending firms.

“This theory is backed by historical on-chain data where we observed regular large inflows and outflows between FTX, Alameda and Genesis Trading wallets with transfer volumes up to $1.7 billion as seen in Dec 2021.”

The collapse of the Terra ecosystem and subsequent bankruptcy of Three Arrows Capital (3AC) likely led to liquidity issues for Alameda due to the drop in value of FTT, which led to a covert, $4 billion FTT-backed loan from FTX.

“Our on-chain data indicates that this may have happened. Amidst the collapse of 3AC in mid-June 2022, Alameda sent ~163m of FTT to FTX wallets, worth ~$4b at that time.”

The researchers claim that the $4 billion transaction volume coincided with a $4 billion loan figure that close associates of Bankman-Fried had divulged in an interview with Reuters.

*Alameda wallet balances. Source: Nansen*

Blockchain data also reflects how Alameda would not have been able to make good on an offer to buy FTT tokens from Binance at $22 on Nov. 6. This was after Binance CEO Changpeng Zhao announced that the exchange would offload its tokens following disparaging reports about Alameda’s balance sheet.

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FTX leadership sues Sam Bankman-Fried over $220M deal made prior to bankruptcy

May 18, 2023 Coin Telegraph

FTX leadership sues Sam Bankman-Fried over 0M deal made prior to bankruptcy

Alameda

When FTX tried to sell the platform after filing for bankruptcy, the top bid was for just $1 million, representing a 99.5% decline in value.

FTX lawyers are suing former CEO Sam Bankman-Fried, co-founder Zixiao Wang, and former senior executive Nishad Singh over the $220 million acquisition of stock-clearing platform Embed, alleging lack of due diligence.

According to a May 17 filing, FTX had paid $220 million to acquire Embed through its United States subsidiary after having allegedly “performed almost no due diligence” on the platform.

After FTX filed for bankruptcy, the judge in charge of the proceedings approved the sales of Embed and other assets of FTX, but the top bidder for the platform offered just $1 million, with FTX’s lawyers stating:

“The bidders had figured out what the FTX Group and FTX Insiders did not bother to assess prior to the Embed acquisition, namely, that Embed’s vaunted software platform was essentially worthless.”

While 12 entities had submitted non-binding indications of interest — the largest of which was $78 million — all but one declined to submit a final bid after conducting more comprehensive due diligence: Embed’s founder and former CEO, Michael Giles.

According to FTX’s lawyers, Giles had “personally received approximately $157 million in connection with the acquisition,” but his final bid to regain ownership of Embed was a paltry $1 million, subject to reductions at closing.

The lawyers additionally accused the FTX insiders of taking “advantage of the FTX Group’s lack of controls and recordkeeping to perpetrate a massive fraud” by using misappropriated customer funds to facilitate the purchase of Embed, while fully aware that the company was insolvent when finalizing the deal.

The lawyers further alleged that misleading records were created to obscure Alameda Research’s role in funding the Embed acquisition, claiming funds had been transferred between FTX entities, not from Bankman-Fried, Singh and Wang as claimed.

*A screenshot from the filing shows a visualization of the flow of funds according to FTX lawyers. Source: Kroll*

FTX wants the transactions to be labeled as “avoidable fraudulent transfers and obligations, and/or preferences,” in addition to having claims made by the defendants disallowed until FTX can recoup the funds lost through avoidable transfers.

FTX filed for bankruptcy on November 11, 2022, and since then, its new leadership has been focused on clawing back funds to repay customers and creditors. It has also been considering a possible relaunch of the exchange.

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IRS claiming $44B from FTX bankruptcy: Report

May 10, 2023 Coin Telegraph

IRS claiming B from FTX bankruptcy: Report

Alameda

The single biggest claim involves unpaid partnership and income taxes of $20.4 billion assessed against Alameda Research.

The United States Department of Treasury and Internal Revenue Service (IRS) have filed 45 claims worth $44 billion against bankrupt cryptocurrency exchange FTX and its subsidiaries.

In what appears to be a tax bill for FTX's sister company Alameda Research LLC that circulated online on May 10, the IRS assessed the firm $20.4 billion due in partnership taxes and payroll taxes. The assessment appears to match the IRS claim found on the website of Kroll’s Restructuring Administration practice, FTX's claims agent.

A further $7.9 billion claim is made by the IRS against Alameda Research LLC, while two claims — $7.5 billion and $2.0 billion — are made against Alameda Research Holdings. The IRS filed the claims under “administrative priority,” enabling its claims to supersede that of unsecured creditors during bankruptcy proceedings.

While Alameda Research was headquartered in Hong Kong, its founders and key personnel, including Sam Bankman-Fried and Caroline Ellison, are U.S. nationals. Unlike most other countries, the U.S. uses a taxation-by-citizenship regime, meaning that U.S. nationals are liable for taxes on their worldwide income irrespective of their place of residence or how much time they spend in the U.S. each year. For partnership entities, taxes are not paid at the partnership level but are passed through their partners and taxed at the individual level.

*In one single claim, the IRS assessed a balance of $20.4 billion against Alameda Research. Source: Kroll*

In April, Cointelegraph reported that FTX had recovered $7.3 billion in assets and would consider rebooting the exchange next year. The announcement was made before the IRS' claims, and at the time, FTX's liabilities still outweighed its assets by an estimated $8.7 billion.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

Cointelegraph reporter Turner Wright contributed to this story.

FTX Founder Sam Bankman-Fried Pleads Not Guilty to New Charges, Including Bribery of Chinese Officials: Report

March 31, 2023 The Daily Hodl

Former FTX CEO Seeks $10M Insurance Fund for Legal Defense, Request Opposed by FTX Debtors and Unsecured Creditors

March 30, 2023 Bitcoin.com

FTX’s Bankman-Fried Is Allegedly Using Alameda Funds to Pay for Legal Defense

March 29, 2023 Bitcoin.com

SBF’s inner circle received $3.2B, mainly from Alameda: Court filings

March 16, 2023 Coin Telegraph

Alameda

Billions worth of loans and payments flowed from FTX entities to Sam Bankman-Fried and five other former executives of FTX and Alameda Research.

FTX and Alameda Research's former top brass received $3.2 billion in payments and loans from FTX-linked entities, according to the FTX administrators handling the firm's restructuring.

FTX, now helmed by CEO John Ray III, has been tracking missing funds from the exchange since its collapse, which it estimates to be $8.9 billion in total.

According to a March 15 statement from FTX Debtors, financial statements it filed in the Delaware Bankruptcy Court point to billions of dollars worth of loans and payments that allegedly flowed to Sam Bankman-Fried and high-ranking executives, which came mainly from trading house Alameda Research.

Sharing the FTX Debtors’ press release just issued: https://t.co/r7PlneGSXF
— FTX (@FTX_Official) March 16, 2023

Bankman-Fried however reportedly received the lion’s share of the funds at $2.2 billion.

Others named in the list include former FTX director Nishad Singh, FTX co-founder Gary Wang, and former CEO of Alameda Research Caroline Ellison, among others.

It provided a rough breakdown of the payments made to the FTX executives, as follows:

$2.2 billion to Sam Bankman-Fried
$587 million to Nishad Singh — former FTX director of engineering
$246 million to Zixiao "Gary" Wang — FTX cofounder
$87 million to Ryan Salame — former co-CEO, FTX Digital Markets (FTX’s Bahamian entity)
$25 million to John Samuel Trabucco — former co-CEO, Alameda
$6 million to Caroline Ellison — former CEO, Alameda

The amounts exclude over $240 million used for various purchases, such as luxury properties in the Bahamas, donations to political and charitable causes and “substantial transfers” to non-FTX subsidiaries, it noted.

FTX’s management said it is currently investigating its rights to pursue potential action against the recipients, along with their subsequent transferees, and that ongoing efforts are “expected to result in the further identification of assets, liabilities and transfers.”

It added it’s looking at ways to claw back the funds from the former executives but said the “amount and timing of eventual monetary recoveries cannot be predicted at this time.”

Bankman-Fried is facing 12 charges relating to conspiracy, wire and securities fraud in connection to the alleged mishandling of funds at FTX and its affiliates. He previously plead not guilty to eight similar original charges.

Ellison, Wang and Singh have pleaded guilty to charges similar to those brought against Bankman-Fried and are cooperating with investigations spearheaded by federal prosecutors.

The first known instance of an executive from FTX or Alameda assisting authorities came as Salame blew the whistle to Bahamian regulators of the potential fraud being perpetrated at FTX which lead them to shutter the exchange just two days later on Nov. 11.

89% still trust centralized custodians despite 2022’s collapses: Survey

March 8, 2023 Coin Telegraph

Adoption

A January survey from Paxos found that 89% of respondents still trusted “intermediaries” to hold their crypto, despite the collapses and bankruptcies last year.

American crypto users haven’t lost their trust in “intermediaries” to hold their crypto, with a January survey from Paxos suggesting a majority of United States crypto hodlers still trust banks, exchanges and mobile payment apps to custody their assets.

An annual online survey published on March 7 by the stablecoin issuer conducted on Jan. 5 and Jan. 6 sought to understand how the crypto winter and “large industry fallouts” in 2022 — including the bankruptcies of FTX and Alameda Research — impacted consumer behavior and confidence in the crypto ecosystem. Paxos noted:

“2022 was a rollercoaster year for the crypto industry.”

“Ranging from some of the highest Bitcoin prices ever to some of the lowest, largescale industry fallouts from companies like Terra, FTX, Alameda Research, and more — it was a volatile and potentially confidence-testing year for the ecosystem,” Paxos added.

After a turbulent end to 2022, crypto consumers have remained confident for 2023. We conducted a consumer survey and found many reasons why crypto is still viewed as a primary staple for financial livelihoods. Read our full survey here: https://t.co/AwFrGMuX0r pic.twitter.com/TZcmct0O5L
— Paxos (@PaxosGlobal) March 7, 2023

However, the survey found that of those that heard and followed the FTX saga, more than half (57%) of respondents either planned to buy more crypto or simply do nothing as a result of the news.

It also found that 89% of respondents still trusted “intermediaries” such as “banks, crypto exchanges and/or mobile payment apps” to hold their crypto, stating:

“In fact, despite the high-profile collapses and underlying poor risk management practices seen in several crypto companies, crypto owners still trust intermediaries to hold crypto on their behalf.”

The survey also found more desire from consumers to be able to buy Bitcoin (BTC), Ether (ETH) and other digital assets from household or traditional banks, with 75% of respondents indicating they were “likely or very likely” to purchase crypto from their “primary bank” if it were offered, a 12 percentage point increase from the year before.

*Graph showing respondents who indicated they were likely to purchase crypto from their primary bank. Source: Paxos*

“Additionally, 45% of respondents reported they would be encouraged to invest more in crypto if there was more mainstream adoption by banks and other financial institutions,” Paxos added.

It said a "significant untapped opportunity" existed for banks if they expanded offerings to digital assets. "Not only would these services satisfy increasing demand, but they would also result in higher engagement,” Paxos claimed.

Respondents qualified for the survey if they lived in the United States, were over 18 years of age, had a total household income greater than $50,000 and purchased cryptocurrency sometime within the last three years. The survey recruited 5,000 participants.

*75% of respondents continued to be confident in the future of crypto. Source: Paxos*

“Despite the volatile 2022 crypto landscape, consumers didn’t lose faith in their crypto investments. This number was unchanged from the previous year’s report, underlining the long-term confidence of those participating in crypto markets,” wrote Paxos.

The timing of the survey, however, means that the gleaned results did not take into account more recent crypto headwinds, such as the bankruptcy of crypto lender Genesis, the crackdown on Binance USD (BUSD) involving Paxos and the financial uncertainty of crypto bank Silvergate Capital.

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