First Mover Asia: Possible Legal Filings Could Clarify FTX’s Relationship to Alameda; Bitcoin Hovers Near $17K
Good morning. Here’s what’s happening:
Prices: Bitcoin and other cryptos spent their day in the green as investors relished encouraging inflation data.
Insights: How intertwined were FTX and Alameda Research? The answer may soon be forthcoming.
Cryptos See Deep Green as Investors Relish U.S. Inflation Report
by James Rubin
After rallying on Thursday amid encouraging U.S. inflation data, bitcoin found a happy nesting place above $17,000.
The largest cryptocurrency by market capitalization was recently trading near $17,000, a more than 4% gain over the past 24 hours as investors filled with new hope about the economic future returned to riskier assets. At one point, BTC rose more than 13% to trade near $18,000. A Wednesday plunge spurred by the ongoing FTX unraveling had sent its price to two-year lows.
Ether was recently changing hands over $1,230, up 5.6% from Wednesday, same time. Other cryptos in the top 20 spent Thursday well into the green. In an email to CoinDesk, 3iQ Head of Research Mark Connors, noted optimistically that the “one persistent development [distinguishing] the crypto winter from all others is the emergence of ETH dominance as measured by the ETH/BTC ratio.”
Other cryptos in the top 20 by market cap, spent the day in the green amid – at least temporarily – waning FTX and inflation fatigue. Even FTX’s beleaguered FTT token, whose accumulation by the exchange’s sister company Alameda Research ignited the current mess, was recently up over 20% to $2.90. Solana’s SOL, which also figured prominently on Alameda’s balance sheet, raising investor alarm, recently rose more than 6%.
On Thursday they had cause for optimism when an unexpectedly positive Consumer Price Index report indicated the U.S. Federal Reserve’s recent diet of hawkish, 75 basis point interest rate hikes were working towards reducing a year-long bout of high inflation.
The CoinDesk Market Index, a broad-based index designed to measure the market capitalization weighted performance of the digital asset market, was down about 3%.
Stocks soared, staging their biggest rally in two years as investors cheered the heartening price data. The tech-heavy Nasdaq rose 7.3%, while the S&P 500 and Dow Jones Industrial Average (DJIA) increased 5.5% and 3.7%, respectively.
In an email, Mati Greenspan, the founder and CEO of research and advisory group Quantum Economics, saw a positive in FTX's disintegration. "In a way, FTX collapsing is a self-inflicted wound by the crypto market intended to prevent bad regulation from killing our future," Greenspan wrote. "I don't think anyone, including CZ [Binance CEO Changpeng Zhao} wished their demise nor the contagion it caused. But frankly I'd much rather see the platform disappear into the void than jeopardize everything we're trying to build."
Joined at the Hip? Details About the FTX-Alameda Relationship May Soon Be Forthcoming
by Sam Reynolds
FTX’s Sam Bankman-Fried publicly claimed that Alameda Research was a “wholly separate entity” from FTX. All the evidence, including corporate filings, pointed to the contrary. The legal fallout from the exchange’s decline, including the increasing possibility of a bankruptcy filing, will clarify how intertwined the two entities have been.
Meanwhile, on Thursday, the 30-year-old former billionaire took to Twitter to say Alameda – his empire’s once mighty crypto quant shop and market maker – would go dark “one way or another.”
A CoinDesk scoop from last week revealed that a notable portion of Alameda’s balance sheet was FTX’s FTT token. Reuters reported Thursday that FTX used customer funds to prop up Alameda Research during market turmoil in May.
A filing from Singapore’s corporate registry has shown that Bankman-Fried and other FTX corporate executives retained key roles at Alameda’s Singapore subsidiary.
The filing listed Bankman-Fried as an authorized representative, alongside Constance Wang (Wang Zhe), FTX’s COO, and Darren Wong, FTX’s CMO. The other representatives on the filing are part of a corporate services firm that helped establish the entity.
This Singapore entity is wholly owned by Alameda’s British Virgin Islands parent. There’s also an Alameda Research entity in The Bahamas, as many of the staff are based on the island.
There’s no Alameda Research in Hong Kong, but rather a Cottonwood Grove which is controlled by Bankman-Fried (it shares the name with an entity in Antigua).
If FTX ends up filing for a U.S. bankruptcy, there will be a document dump, much like in the case of Three Arrows Capital, where all will be laid bare.
Meanwhile, the Financial Times has a first look at what it believes is the FTX empire and the results of their research is impressive.
Surely regulators like the CFTC wereaware of the Alameda-FTX relationship for some time, but this spectacular collapse of the two companies will force them to act.
The prevailing narrative of FTX-Alameda had been one of brazen corruption:— jonwu.eth (@jonwu_) November 8, 2022
FTX gives Alameda priority orderflow, allowing its sister hedge fund to front-run other traders.
Taking a few privileged basis points on the 3rd largest exchange would be a perpetual money machine.
During the GameStop frenzy of early 2021, market maker Citadel Securities came under intense scrutiny for its relationship with brokers. Now imagine if Citadel and the New York Stock Exchange were one and the same. Regulators’ heads explode if Jeffrey Sprecher and Ken Griffin’s names appeared together on a list of a company’s directors.
And what do other crypto market makers think of all of this? They don’t like it.
One that spoke to CoinDesk on background clarified that market makers and takers (the counterparty) must have equal access to the exchange with no party at an advantage. Exchanges are also not supposed to co-mingle funds, something that Retuers reported FTX is guilty of.
We’ll learn a lot more if FTX ends up before a bankruptcy court. It’ll probably be the U.S. Bankruptcy Court for the Southern District of New York, which has heard many of the major crypto bankruptcy cases this year. And it might even be the same judge too.
11 p.m. HKT/SNST (3 p.m. UCT): University of Michigan Consumer Sentiment Index (Nov./preliminary)
Bitcoin jumped above $17,000 after hitting two-year low. FTX reportedly warned of possible bankruptcy, while Tron's Justin Sun was "putting together a solution." This came as U.S. regulatory scrutiny of FTX was reportedly heating up. CFTC Commissioner Kristin N. Johnson and Citi Digital Asset Analyst Joe Ayoub joined "First Mover" to discuss the latest developments surrounding the FTX fallout.
Revisiting MicroStrategy's Pain Points as Bitcoin Tumbles: This week's plunge in the price of bitcoin again raises questions as to whether Michael Saylor will at some point be forced to sell some or all of his company's vast holdings.
FTX Assets Frozen by Bahamian Regulator: The Bahamas Securities Commission said it was a “prudent course of action” to “preserve assets and stabilize the company.”
The Role Regulators Played in the FTX Fiasco: The collapse of Sam Bankman-Fried's blockchain empire is a direct result of crypto’s centralized development and lack of U.S. regulations.
FTX Has Made $34M in Trading Fees Since Recent FTT Token Burn Despite Withdrawal Freeze: FTX did not report the recent token burn, which was scheduled on Nov. 7.
Binance Releases Wallet Addresses of $69B Crypto Reserve: The exchange said it will share its proof-of-funds in the coming weeks.