The truth behind FTX’s collapse: Alameda may have gone bankrupt in the second quarter, and its rescue backfired on FTX

1. I found evidence that FTX may have provided a massive bailout to Alameda in Q2, and is now hurting them.

40 days ago, 173 million FTT tokens worth over $4 billion were transferred on-chain.

2. On September 28, over $8.6 billion worth of FTT was put on the chain. This is the largest daily change in the existence of FTT tokens so far, and one of the largest daily changes of ERC20 tokens we have recorded at Coin Metrics.

3. I used CM ATLAS to browse all transfers that occurred that day and ranked them. I found a special transaction that interacted with the FTT ICO contract. This 2019 contract *automatically* released 173 million FTT from the ICO tokens.

https://etherscan.io/tx/0x975d6223257504c418e891d250093e20757441cc592fed5d1fee9c1380860786#eventlog

4. The recipient of $4.19 billion worth of FTT tokens was none other than Alameda Research! So, Alameda and FTX have been connected since day one, and Alameda was clearly involved in the FTX ICO. But what happened next is interesting…

5. Alameda then sent the *entire* balance to the address of the FTT ERC20 deployer (creator), which is controlled by someone at FTX. In other words, Alameda automatically vested $4.19 billion worth of FTT, only to immediately send it back to FTX.

https://etherscan.io/tx/0x8c7cf8d166c8bef112bf0f101ddc594c4d83646caff63516c2bfc5c1dd7a6149

Here's what I think happened:

Alameda exploded in the second quarter along with 3 Arrows Capital and others.

Alameda survived because it was able to obtain funds from FTX using 172 million FTT as “collateral” that was guaranteed to be released after 4 months. Once the FTT was released, all tokens were returned to FTX as repayment.

6. Remember that the FTT ICO contract automatically releases. If FTX lets Alameda implode in May, their collapse will ensure that all FTT tokens subsequently released in September are liquidated. This would be bad for FTX, so they have to find a way to avoid this.

7. The timing is sound. Alameda and FTX basically put all their chips on the table in the second quarter and used the money to bail out others. This solidified FTX's image as a solvent and responsible institution, which helped the price of FTT rise. The same is true for SBF's political actions.

8. Alameda’s rescue plan could weaken FTX’s balance sheet to the point where it is no longer solvent. This would be fine if the price of FTT did not collapse and trigger a bank run. This is why Alameda is doing everything it can to protect the price of FTT.

9. This is where I think it gets even crazier. It’s possible that someone at Binance knew about this arrangement between FTX and Alameda. An opportunity presents itself. As large holders of FTT, they could start deliberately disrupting that market to force FTX into a liquidity crunch.

10. Over time, Binance saved FTX. Did CZ walk out on one of his biggest competitors at the expense of a relatively large FTT cost that he was going to unwind anyway? If true, the cost is huge.

11. It is important to note that this is my personal and highly speculative opinion of what happened based on these on-chain artifacts. More truth may emerge in the next few days.