Alameda Research, the trading ship in the middle of Bankman-Fried’s and FTX’s downfall, had a ‘secret exemption’ from liquidation protocols on FTX as alleged by the newly appointed CEO, John J. Ray III, according to a bankruptcy filing on Thursday.
Although both firms were perceived to be different companies, FTX and Alameda were rooted together. Since both platforms filed for bankruptcy protection early last week, a lot has been discovered.
However, the court filing revealed, though not in detail, that Alameda had secret benefits when making risky leverages on FTX that other traders did not.
In a series of tweets, SBF company made some of its comments to its users, saying, “there was too much leverage-more that I realized. A run on the bank and market crash exhausted liquidity. So we’ll try to raise liquidity, make customers whole and restart.”
The new CEO termed Alameda as a “crypto hedge fund,” noting, “the secret exemption of Alameda from certain aspects of FTX.com’s automation liquidation protocol’’ are among numerous issues of poor security and financial controls that have been revealed since he took over the company just hours before it filed for bankruptcy protection in a U.S court.
Nevertheless, Ray, who previously cleared all the mess left by Enron in his bankruptcy proceedings, stated that FTX was the worst failure of controls and record-keeping among many poor management practices he has seen in his long-term career of over 40 years.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,’’ Ray noted as he gave a few details of the company that was worth $32 billion a couple of weeks ago and now it’s worth nothing.
However, the filing doesn’t give more details on what the stated “secret exemption” entailed, but it says that Alameda could operate outside FTX’s standard liquidation protocols. According to a Twitter post by a pseudonymous crypto lawyer known as Wassie lawyer, dubbed the issue “literally God-mode.”
Ray’s Efforts To Revive FTX
FTX allegedly sent approximately $10 billion of its funds-including customer funds, to Alameda to cover the firm’s losses, which probably led to the firm’s liquidity crisis.
All the associated companies, including Alameda trading firm and FTX, filed for Chapter 11 bankruptcy protection, as the Founder and CEO of the crypto company Sam Bankman-Fried stepped down from his role in the company.
Ray has also highlighted some practices such as registering the employees’ real estate names of Bahamas, using company funds, and managers approving disbursements by posting emojis on an internal chat platform.
Regardless of his tinted image, the former firm CEO, Mr. Bankman, has kept on tweeting regarding FTX and Alameda trading firm and rebuked the impression that he has portrayed as an‘’ effective altruist’’ and regulation-friendly builder of some of the controversial messages that he did not intend to be public.
However, FTX tweeted a statement asking founder and former CEO Mr. Bankman-Fried to keep his distance from the crypto firm. FTX is among the giant crypto companies that have shaken the faith in its customers and many crypto users, as its collapse has undoubtedly gone down to history.