Alameda Had ‘Secret Exemption’ From FTX Liquidation Protocols, New CEO Says

Alameda Analysis, the crypto hedge fund on the middle of Sam Bankman-Fried’s and FTX’s downfall, had a “secret exemption” from the crypto alternate’s liquidation procedures, in line with chapter filings Thursday.

The revelation in a court docket submitting, although scant on particulars, would point out that Alameda held a bonus when making dangerous leveraged trades on FTX. Crypto derivatives exchanges reminiscent of FTX routinely promote the collateral of merchants who borrowed its cash to position bets that turned south.

John J. Ray III, the brand new CEO of FTX, cited “the key exemption of Alameda from sure elements of FTX.com’s auto-liquidation protocol” amongst a listing of poor safety and monetary controls which were uncovered since he took management of the corporate within the early hours of Nov. 11, shortly earlier than it filed for chapter in a U.S. court docket.

The blurred traces between Alameda and FTX, two supposedly separate companies, has proved essential within the collapse of the corporate. It was the revelation by CoinDesk that Alameda’s stability sheet was full of FTX-issued tokens that led to questions concerning the firm’s monetary well being, ultimately snowballing into insolvency.

The allegations are a part of a litany of poor administration practices highlighted by Ray, beforehand accountable for sweeping up the mess left by Enron, who stated FTX was the worst failure of inside controls and record-keeping he has seen in his 40-year profession.

Ray additionally highlighted practices reminiscent of registering Bahamas actual property in staff’ names utilizing firm funds, and managers approving disbursements by posting emojis on an inside chat platform.