Did FTX Use Customers Monday To Bailout Alameda? Binance Purchase Updates November 2022
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According to a Reuters report citing people familiar with the operations, after Alameda Research suffered a string of losses in May and June of this year, the trading firm’s founder Sam Bankman-Fried transferred at least $4 billion in FTX funds to Alameda. A portion of these funds reportedly were FTX customer deposits, although their exact value is unknown, two people told Reuters. According to the people, Bankman-Fried did not contact other FTX officials about the decision because he was concerned that word might get out.
Another chunk of the funds used to prop up Alameda was secured by assets including FTT, the native token of the FTX crypto exchange, and shares in the trading platform Robinhood, per the report. Bankman-Fried purchased a 7.6% stake in Robinhood back in May.
While Reuters could not determine the full extent of losses Alameda suffered, these reportedly included a $500-million loan agreement with crypto investment firm Voyager Digital, which filed for bankruptcy protection in June.
FTX.US, the American arm of the FTX exchange, won the bid to buy out Voyager Digital in September after it offered a $1.4 billion deal, beating out Binance and Wave Financial.
A tentative deal between FTX.US and Voyager was struck last month and could result in customers of the bankrupt crypto broker recovering about 72% of their funds.
FTX and Binance
The report comes amid the crypto market turbulence sparked by the news of FTX—the industry’s leading player until very recently—suffering a liquidity crunch and finding itself on the brink of bankruptcy.
In an incredible series of developments around FTX this week, Binance, the world’s largest crypto exchange by trading volume, first expressed its intention to purchase the rival company but ditched the deal on Wednesday with CEO Changpeng Zhao citing issues that “are beyond our control or ability to help [to provide liquidity to FTX].”
In 2019, Binance announced its strategic investment in FTX, with Zhao saying the two entities aimed “to grow the crypto economy together.”
Then in 2021, SBF told Decrypt that the firm had “repurchased shares from Binance to buy them out of our cap table. I think it just makes sense, given the role that our businesses are playing in the space. It can also give us more flexibility going forward.”
Binance received those funds partly in FTT tokens.
Last Sunday, Zhao announced that he would begin dumping those holdings on the open market.