FTX Allegedly Lent Alameda Research $10B in User Funds
According to the Wall Street Journal, FTX lent Alameda Research billions in user assets to fund its trading.
Details on how Sam Bankman-Fried’s FTX crypto exchange found itself underwater with its finances are beginning to emerge slowly. A report by the Wall Street Journal (WSJ) claims that FTX tapped into its users’ assets to fund Alameda Research’s risky trading bets that resulted in the downfall of both companies.
FTX Had $16 Billion in Customer Assets and Lent $10 Billion to Alameda
The WSJ stated that Sam Bankman-Fried told an investor this week that FTX lent Alameda Research an estimated $10 billion. The funds were in the form of extended loans to Alameda using money users had deposited for personal trading. Mr Bankman-Fried has since admitted that the decision to do so was a poor judgement call.
Alameda further used the lent funds for what the WSJ describes as risky bets, thus kickstarting the process of FTX’s implosion that has led to its potential insolvency and search for investors to bail it out.
It is believed that FTX held a total of $16 billion in customer assets, lending the $10 billion, or 62%, to its sister company, Alameda.
Sam Bankman-Fried Apologises on Twitter
Events surrounding FTX have occupied discussions on traditional media and crypto Twitter.
A few moments ago, Sam Bankman-Fried took to the same social media platform to tell his side of the story regarding the financial situation at FTX. He started his Twitter thread by stating that he was sorry and that he had ‘f*cked up and should have done better.’
In addition, Mr Bankman-Fried admitted that he should have communicated more efficiently during the initial moments of uncertainty due to FTX halting withdrawals. He, however, explained that his hands were tied given that negotiations with Binance were ongoing.
FTX.US is Okay — Sam Bankman-Fried
Mr Bankman-Fried also clarified that only FTX International is affected by the liquidity crisis, and FTX.US is okay.
He added that his main priority moving forward was ‘doing right by users’ and the team at the exchange would dedicate the next week to raising FTX’s liquidity from ‘a number of players [FTX is] in talks with.’
Sam also confirmed that Alameda Research was winding down trading.
~By John P. Njui~
