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Report Suggests Alameda Rescued FTX By Covering $1 Billion Trade Loss in 2021

Report Suggests Alameda Rescued FTX By Covering $1 Billion Trade Loss in 2021

Ana N.
by Ana N.
2 years ago
·
Posted in Crypto News
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

The crash of FTX left the market in disarray after it halted withdrawals and filed for bankruptcy. Apart from FTX, other firms also filed for bankruptcy due to the loss of funds in the exchange.

During the filing, the crypto market learned that the firm didn’t have a proper structure to manage its operations. That’s why many top shots have declared the fall due to exchange’s management. Moreover, SBF utilized customers’ assets without their knowledge, pointing to mismanagement.

Related Reading: Bitcoin Hashrate Continues Sharp Plunge As Miners Give Up

But the issue gets interesting as SBF keeps trying to protect Alameda Research from the problems of FTX. Alameda even moved earlier before the exchange’s bankruptcy to withdraw a sum of $204 million from FTX, protecting itself from the crash.

Sam Bankman-Fried had earlier denied that the two firms operate together. But the latest reports revealed that both Alameda and FTX are in sync with each other.

Alameda Assistance To FTX In 2021 Revealed

As SBF denies joint operations with Alameda Research, those interested in the case expose their cooperation. The investigations have revealed that Alameda once covered a $1 billion loss for SBF led crypto exchange in 2021.

The details of the bailout are that FTX faced losses due to one client’s leveraged trade that went south. Unfortunately, FTX buffers that would have protected it from the losses failed. The obscure token was MobileCoin, which recorded an unimaginable price spike but couldn’t sustain it.

MobileCoin price skyrocketed from $6 to $70 in April 2021. Then, after a short time, the crypto crashed, causing a massive loss to a trader that borrowed hugely against it. As a result, the FTX exchange faced millions of losses, leading to Alameda’s rescue.

SBF’s crypto exchange allowed the trader to leverage with MobileCoin since it’s a standard practice amongst crypto exchanges. Usually, users of exchanges that offer leverage would use their assets as collateral for the leveraged positions.

If peradventure the value of the asset falls, the exchange would liquidate the positions themselves to recover their money. But the fall of MobileCoin was too low to enable FTX to recover costs.

FTX Turned To Alameda As The Last Resort

The crash of MobileCoin led to hundreds of millions of dollars in losses for SBF’s crypto exchange. But Alameda rushed in to rescue the firm. The action shows that the sister company to FTX was its last resort during a time of funds shortage.

Many people disagree with SBF’s claims that Alameda and FTX operate independently. Since the firm will rescue the other in crisis, it’s evident that the former CEO’s claims of not knowing how Alameda works are a lie.

Related Reading: No Love Lost: Why Bitcoin Is Becoming ‘Irrelevant,’ According To ECB Officials

SBF stated in a November interview that Alameda Research had a leveraged position worth billions of dollars with FTT before its bankruptcy. But, unfortunately, the exchange couldn’t liquidate it due to the speed at which FTT crashed.

Report Suggests Alameda Rescued FTX By Covering $1 Billion Trade Loss in 2021
FTT price falls to $1.36 l FTTUSDT on Tradingview.com
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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