A Look Into The Books Of Alameda Research

In a recently published article by Coindesk Business, it was reported that Alameda Research has $14.6 billion of assets as of June 30, 2022, according to a private document to which the news outlet had access. For context, Alameda Research is the trading arm of Sam Bankman-Fried’s crypto empire which also includes the third-largest cryptocurrency exchange by volume — FTX. Although Sam Bankman-Fried owns Alameda Research, he is more popularly known for his founding and CEO role at FTX Exchange. Alameda Research initially started off as a lucrative arbitrage trading firm but has spawned itself into one of the largest market makers of digital tokens globally. With a core staff of only 8 and a total staff of 30, it reported a profit of about $1 billion last year alone, putting it on par with Wall Street mainstays, including some of the biggest traders of US stocks. And it has quickly become a force in everything crypto from decentralized finance to venture investing and even distressed lending. It has investments in Near Blockchain, 3commas, ZKX, Cardinal and most protocols within the Solana ecosystem, and was touted to buy Voyager Digital when the crypto broker filed for bankruptcy in July this year.

On Alameda Research’s Balance Sheet, it states that it has $14.6 billion of assets, against $8 billion of liabilities. For anyone new to this, the worth of the assets of a company minus the worth of its liabilities equals the true value of the company’s businesses — what is called shareholder’s equity. A quick glance at Alameda’s books will definitely tell one that the company is doing okay. $14.6 billion minus $8 billion translates to a mammoth $6.6 billion in equity for the shareholders of the company, however, a closer look at what makes up these assets would sincerely leave anyone worried. 

Alameda Research has 

  • $3.66 billion in “unlocked” FTT (25% of total assets)
  • $3.37 billion of “crypto held” assets
  • $2.16 billion in FTT “collateral” (15% of total assets)
  • $863 million in “locked” SOL (6% of total assets)
  • $292 million in “unlocked” SOL 
  • $41 million in SOL collateral
  • Other tokens mentioned by name are SRM (the token from the Serum decentralized exchange Bankman-Fried co-founded), MAPS, OXY and FIDA which are primarily Solana ecosystem tokens.
  • $134 million in USD and
  • $2 billion in equity securities.

This data tells us that Alameda has a whopping 71% of its assets tied in crypto tokens. This might be alarming but it does not end here. 48% of these assets are either in FTT or SOL.

FTT and SOL are the primary tokens of the FTX Exchange and the Solana Blockchain respectively. FTT’s use case is for discount on fees and rebates on FTX while SOL is used to pay for transaction fees on Solana. FTT has a circulating market capitalization of $3.35 billion with an average daily trading volume of about $58 million within the past month. FTT held by FTX is 1.7x greater than the circulating FTT and 100x greater than the token’s average daily trading volume. There is no way on God’s earth that Alameda would unload these tokens without crashing the token’s price resulting in far less value for the worth of the tokens themselves. FTT held by Alameda is not “worth” $5.82 billion. It is worth at least 90% less. SOL on the other hand is better off with a circulating market cap of $12 billion and commanded about $774 million in average daily trading volume within the past month. Given that “only” $1.2 billion is held in SOL, Alameda could get a pass on this one. Also, there is the inclusion of Solana ecosystem tokens like SRM, OXY, MAPS and FIDA but the report does not state how much is held in them. If we can hypothetically say that 50% of what’s left on the $14.6 billion is in these tokens, that means that $1.04 billion is in them. This figure would be insane as all their circulating market caps combined is at a mere $215 million. Is Alameda really this illiquid? 

More unsettling is realizing how closely associated Alameda is to these tokens. Both FTX and Solana have ties to Sam Bankman-Fried (SBF) and therefore Alameda itself. SBF through Alameda is one of the biggest investors in Solana and carols it on Twitter from time to time while he quite literally is the founder and CEO of FTX. Although both FTX and Alameda have denied rumors of any collusion in operating activities between both firms as that would be highly inappropriate, the crypto community has hardly ever believed them. SBF had up until recently, been working in both firms and only left Alameda last year while employees have been shuffled across both offices. This revelation on Alameda’s assets not only raises liquidity concerns but also casts more doubt on the independence of both firms and how much control SBF still has on Alameda.

Okay, Alameda has liquidity concerns but by how much? One cannot really determine how illiquid the trading firm is without looking at the other side of their balance sheet — their liabilities. Coindesk reports that it did not get a proper look at Alameda’s liabilities but the liabilities are dominated by $7.4 billion of loans and $292 million in “locked” FTT tokens. In hindsight, when Voyager Digital filed for bankruptcy earlier this year, it named Alameda as one of its debtors to the tune of $376 million. If this and most other Alameda’s loans are denominated in dollars, then the firm is sailing in deep and turbulent waters. If the loans are predominantly denominated in crypto assets other than FTT and SOL, creditors need to also be wary of a crisis. In all, Alameda is not as robust as it seems.

Worthy to note that Sam Trabucco, the firm’s co-CEO recently stepped down “to prioritize other things in life” leaving the firm to the sole stewardship of Caroline Ellison who is a math graduate from Stanford with prior experience working as an equities trader at Jane Street. SBF reportedly still owns almost all of Alameda. 

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