Binance versus FTX: the face/off

Could JPEG Morgan be more of a 3MF Global? Breaking on Sunday afternoon:

We will try to do so in a way that minimizes market impact. Due to market conditions and limited liquidity, we expect this will take a few months to complete. 2/4

— CZ 🔶 Binance (@cz_binance) November 6, 2022

The “recent revelations” were a CoinDesk story on Wednesday that examined the overlap between Sam Bankman-Fried’s FTX crypto exchange and Alameda Research, his hedge fund. According to a “private financial document reviewed by CoinDesk”, Alameda’s balance sheet has been propped up by FTX’s native token, FTT.

The financials make concrete what industry-watchers already suspect: Alameda is big. As of June 30, the company’s assets amounted to $14.6bn. Its single biggest asset: $3.66bn of “unlocked FTT.” The third-largest entry on the assets side of the accounting ledger? A $2.16bn pile of “FTT collateral.”

There are more FTX tokens among its $8bn of liabilities: $292mn of “locked FTT.” (The liabilities are dominated by $7.4bn of loans.)

Almaeda Q2 assets also included $1.2bn in the solana token, and a further $3.37bn in unidentified crypto, against just $134mn in cash in hand as of June 2022, CoinDesk reported.

FTT is a so-called exchange token that gives FTX customers discounts and referral commissions. Its price is primarily supported by FTX exchange fees — FTX says it uses one third of its revenue to buy back FTT tokens.

The $5.82bn of FTT booked on Alameda’s balance sheet as of June 30 compared with a total value that day of just $3.32bn for all the FTT in supply, Protos reported in a follow-up story.

Having previously declined to comment, Alameda chief executive Caroline Ellison tweeted on Sunday to seemingly confirm the veracity of the Coindesk document but said it gave an incomplete picture:

– the balance sheet breaks out a few of our biggest long positions; we obviously have hedges that aren’t listed
– given the tightening in the crypto credit space this year we’ve returned most of our loans by now

— Caroline (@carolinecapital) November 6, 2022

Crypto blogger Dirty Bubble Media last week picked up on the Coindesk report to draw parallels between Alameda and Celsius Network, the bankrupt crypto lender. Celsius has been accused of artificially inflating its balance sheet by manipulating its own native token, CEL.

In response to Binance’s announcement that it would be dumping its FTT holdings, Alameda’s CEO suggested buying the tokens and arrested a price freefall. Chart below via CoinMarketCap:

@cz_binance if you’re looking to minimize the market impact on your FTT sales, Alameda will happily buy it all from you today at $22!

— Caroline (@carolinecapital) November 6, 2022

Though CZ insisted that his actions were not “a move against a competitor”, it’s worth noting there is little love lost between him and SBF. Just a few days ago, SBF was making rather pointed allusions to CZ’s probity:

excited to see him repping the industry in DC going forward!

uh, he is allowed to go to DC, right?

— SBF (@SBF_FTX) October 30, 2022

Update: Underscoring how Mastodon has some way to go to become the go-place to rubberneck hilarious crypto feuds, CZ didn’t exactly downplay the animosity in a follow-up tweet later on Sunday.

Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs. Onwards.

— CZ 🔶 Binance (@cz_binance) November 6, 2022

SBF’s reaction to the latest development has (so far) been somewhat less adversarial:

Yes Sam, the FTX Send feature is all anyone can talk about today.

— davis 🐺🦊 (@basedkarbon) November 6, 2022