Ownership Questions Over FTX’s Ties to Alameda Research

As Alameda Research becomes one of the global leaders in the digital token market, there are growing concerns about its close ties to FTX, the world’s second-largest cryptocurrency exchange.

Although no irregularities have taken place, the growing influence of companies founded by Sam Bankman-Fried and interconnected since their inception is raising eyebrows over potential conflicts of interest, according to a Bloomberg report.

FTX and Alameda “were able to benefit from a regulatory loophole that allowed them to trade and profit from cryptocurrencies without having to follow the same rules as traditional financial institutions,” said Cory Klippsten, CEO of startup Swan. Bitcoin. Bloomberg.

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Alameda and FTX

Staffed by recent graduates from quantitative firms such as Jane Street and Susquehanna, Alameda Research began as little more than an exclusive trading store. He was quickly able to take advantage of a particular gap in the crypto exchange at the time.

Known as the “kimchi” bounty, in which Bitcoin traded at a 10% profit margin between the United States and Japan, Alameda was able to earn $20 million before this window closed.

Cryptocurrencies then became more popular, attracting more institutional investment and evaporating similar arbitrage opportunities. Therefore, Bankman-Fried decided to launch FTX as a way to reinvest earned capital and capitalize on growing market opportunities.

As an exchange, FTX makes its money from transaction fees and interest on loans to traders, while Alameda has shifted its focus from arbitrage to market making, generating revenue from buying and selling tokens, then profiting from the gap between what it pays and what it pays. It offers.

Last year, with a workforce of just 30 people, Alameda was able to generate $1 billion in profits.

When Bankman-Friend moved to FTX full-time last year, Caroline Ellison took over as general manager. Both insisted that companies are separate and siled when it comes to sharing information and resources.

Potential conflicts

Yet despite their professed distance, their respective sizes and functions may present inherent ethical ambiguities. According to Larry Tabb, head of market structure research at Bloomberg Intelligence, exchanges and market makers with close ties and financial interests are “not conducive to being a fair market.”

There are “reasons to split the duties, to make sure everyone is up to par,” Tabb added. “When you consolidate and decompress divisions, you get inherent conflicts.”

An analogy he gave is if the New York Stock Exchange and market giant Citadel Securities shared the same owner.

However, given the global reach of what has become the world’s second largest cryptocurrency exchange, Bankman-Fried said it is one of the most regulated in the world.

Recognized by national authorities in Japan, Australia, Switzerland, Dubai and the Bahamas, it is also registered with the European Union and several US federal agencies.

“Crypto has been much more lightly regulated with far less oversight than traditional finance, but I don’t think that’s actually true for FTX,” he said.

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Ownership Questions Over FTX’s Ties to Alameda Research


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