In the aftermath of the FTX fallout, Bitcoin saw its price drop to a two-year low of $15,000, the exchange’s native token is on its way to becoming essentially worthless, and stablecoins across the market have been struggling to keep their peg.
However, the fall of Sam Bankman-Fried’s empire is far from over. The contagion and second-order effects are yet to be felt and could push the market deeper into the red.
But, what caused the fallout that could set the crypto industry several years back?
CryptoSlate’s in-depth analysis of on-chain data reveals the relationship between FTX and Alameda and how the two companies siphoned money off of each other using Binance as an unsuspecting intermediary.
Alameda and FTX — two sides of the same coin
To understand the scope of Alameda’s ties to FTX we must dig deep into both companies’ token flows.
As the majority of their holdings lay in various stablecoins and altcoins, emitting Bitcoin (BTC) and Ethereum (ETH) from the data paints a much clearer picture as to how the two transacted.
Data analyzed by CryptoSlate showed that, in the past year, over 90% of tokens from wallets associated with Alameda ended up at FTX. Around 9% of all outflows from Alameda ended up at Binance.
Looking at inflows to FTX reveals the scope of Alameda’s domination. In the period between November 2021 and November 2022, $49 billion worth of various tokens were transferred from Alameda to FTX. The inflows were increasing month on month and saw a vertical jump at the end of September 2022 when over $4.2 billion worth of tokens were sent to FTX.
Arkham Intelligence, a cryptocurrency analysis firm, confirmed the inflow in its own reports. The company’s scanner shows an inflow of around $4 billion worth of FTT into the exchange.
And while most of the money going out of Alameda ended up at FTX, it looks like the majority of the money that went back into the trading firm came from Binance. Since last November, around $25 billion worth of various altcoins and stablecoins went into Alameda. Out of the $25 billion, $7.1 billion came from FTX wallets, while over $15.5 billion came from Binance wallets.
The inflows from Binance and FTX dwarf inflows from other exchanges, as shown in the graph below.
The trifecta of Alameda, FTX, and Binance is further evident when looking at outflows from FTX. Since last November, the exchange saw an almost equal split of outflows between Binance and Alameda. Glassnode data analyzed by CryptoSlate showed that around 38% of token outflows from FTX went to Alameda, while 36% went to Binance wallets. Only 26% of the funds exiting FTX went to wallets associated with other companies and exchanges.
Fingers pointed at the middleman
A deep look at wallets associated with Alameda shows that the company kept a healthy balance of a basket of various tokens throughout 2021. On average, the company held about $200 million worth of USDT, USDT, DAI, HUSD, ETH, and WBTC — all considered to be high-quality collateral.
The November bull run pushed Alameda’s balances through the roof, culminating in January 2022 at $1.2 billion.
Luna’s collapse in May this year caused a massive dent in Alameda’s balances. It took around two months before the dent was shown, with the biggest drop felt in August. The company hasn’t managed to recover since and has seen its balances drop continually as it entered the fourth quarter.
It’s unclear what caused the drop in Alameda’s balances. The industry has been ripe with rumors about the company panic selling its reserves to cover the losses it incurred after the Luna collapse.
Those that don’t believe this was panic selling note that Alameda could have sold its reserves to return the funds back to FTX. The company’s current balance sheet problems also make selling for profit highly unlikely.
Further investigation into Alameda’s and FTX’s transactions is needed to understand the full scope of the crisis they caused. However, the data analyzed so far shows an undeniable bond between Alameda and FTX. The two deepened their ties through Binance, which they might have used as an unsuspecting middleman in their year-long escapade.