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Alameda covered $1bn loss for FTX in 2021 (report)

FTX’s sister trading desk, Alameda Research, bailed out the exchange before suffering a potential $1 billion trading loss in early 2021.

This news comes amid claims by former FTX CEO Sam Bankman-Fried that FTX and Alameda are independently operated companies.

  • As reported According to the Financial Times on Friday, people familiar with the matter said that FTX suffered massive losses after a client’s leveraged trade in an obscure crypto token went south. Meanwhile, the “buffers” designed to protect the exchange from losses on a bad trade failed to protect FTX.
  • A common risk management technique used by companies when issuing loans is to obtain collateral from the borrower in advance. If the borrower’s loan-to-value ratio falls to a certain level, the lender repays the loan and sells the customer’s assets to cover costs in their own name.
  • The token in question, called MobileCoin, surged from $6 to $70 in April 2021, only to crash just as quickly shortly thereafter. At the time, a trader was borrowing against the coin with an unusually large position that Alameda had to step in and help cover. The trading table lost hundreds of millions of dollars in the process.
  • Additional submitted by Nansen Blockchain-Evidence also suggests that Alameda acted as FTX’s last resort when funds were tight.
  • The event signals deep ties between Alameda and FTX, both companies founded by Sam Bankman Fried, despite the ex-CEO’s claims that he had no knowledge of what was going on at Alameda.
  • Sam Bankman-Fried explained during a interview last month that Alameda itself had a multi-billion dollar leveraged position open on FTX before it went bankrupt.
  • Although the position was collateralized by FTT tokens, the FTT market was too illiquid and falling too fast for FTX to liquidate the position and remain solvent.

Source: Crypto News Deutsch

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