Key Takeaways:
- Alameda Research had unfair trading advantage on cryptocurrency exchange FTX
- The US Commodity Futures Trading Commission (CFTC) filed a complaint against Sam Bankman-Fried (SBF)
- Alameda, the trading firm of SBF, had unlimited line of credit on FTX
YEREVAN (CoinChapter.com) — Alameda Research, Sam Bankman-Fried’s bankrupt trading firm, had an unfair trading advantage on the defunct crypto exchange FTX. According to a recent filing by the US Commodity Futures Trading Commission (CFTC), executives of the exchange granted special privileges to the trading firm.
In its complaint filed in the Southern District Court in New York, the CFTC alleged that FTX executives allowed Alameda to maintain an essentially unlimited line of credit on FTX. Moreover, they allowed Alameda to access the exchange without going through some compulsory verification processes. Besides, the agency also claimed that Bankman’s-Fried granted Alameda Research unprecedented access to user holdings on FTX.
“At Bankman-Fried’s direction… FTX Trading executives created other exceptions to FTX’s standard processes that allowed Alameda to have an unfair advantage when transacting on the platform, including quicker execution times and an exemption from the platform’s distinctive auto-liquidation risk management process,”
CFTC said in a complaint.
The Commodity Futures Trading Commission’s complaint also provides details of various violations by the two firms and other insiders, including SBF.
As CoinChapter earlier reported, Bahamian authorities have arrested Sam Bankman-Fried following a sealed indictment from the US Attorney for the Southern District of New York.
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SBF personally granted favors to Alameda Research
The fact that Sam Bankman-Fried used both his companies to recklessly handle investors’ funds is not new. The closely-knit system that SBF put to work ensured that millions got allegedly siphoned off through various channels.
During a recent interview with the Wall Street Journey, the disgraced entrepreneur claimed he had no idea what Alameda Research did with the funds. However, the latest CFTC filing reveals he was personally responsible for granting special favors to the trading firm managed by his ex-girlfriend Caroline Ellison.
Thanks to SBF’s patronage, Alameda had a time advantage over other traders. In particular, the firm’s transaction orders were received several milliseconds faster than those of other API users.
Moreover, Bankman-Fried’s intervention allowed Alameda to execute a transaction even if it did not have the funds available in its account to do so. The company also had an unlimited credit limit with the exchange.
“Bankman-Fried directed FTX personnel to raise the borrowing limit to a level that would be unlikely to ever be exceeded. On information and belief, FTX personnel ultimately raised Alameda’s borrowing limit to be many tens of billions of dollars. Alameda’s borrowed funds could also be withdrawn from FTX,”
the filing alleges.
Earlier this week, the U.S. Securities and Exchange Commission (SEC) charged Sam Bankman-Fried with defrauding investors. Before losing over $16 billion in personal wealth and filing for bankruptcy, SBF spent billions on buying luxury properties in the Bahamas for his family and colleagues.
As law enforcement clamps down, more details will emerge about the undue advantages Alameda Research had.
