Crypto trading firm Alameda was on the verge of implosion, former CEO says

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Crypto trading firm Alameda was on the verge of implosion, former CEO says

Insiders at Alameda Research only discovered that the trading firm was on the verge of implosion because of an confession from former CEO Caroline Ellison, not internal warning signs, a former engineer for the firm, who shared a recent interview on CoinDesk TV.

Alameda was a cryptocurrency trading venture started by Sam Bankman-Fried, Caroline Ellison, and Sam Trabucco. Although Bankman-Fried tried to put some distance between Alameda and its sister company, cryptocurrency exchange FTX, ultimately, it was revealed that the two firms were bound at the hip when CoinDesk reported that divisions between the two firms were blurry as a material amount of Alameda's balance sheet comprises of FTX's FTT exchange token.

The scandals were ultimately followed by the collapse of both Alameda and FTX, along with charges against Bankman-Fried. His trial on charges of fraud and conspiracy began Wednesday.

Baradwaj also said that the internal security practices and checks and balances at the trading firm were quite poor, which caused a 'fat finger' trade in 2021 that caused the price of bitcoin to temporarily drop by up to 87%.

At the time, CoinDesk reported, quoting Baradwaj, that a misplaced decimal caused a large trade to go through, which sold bitcoin for pennies on the dollar.

In Michael Lewis's book, the author notes that risk limits make itself more attractive, and later wrote that the losses caused by this unsettling policy were in any case trivial.