cryptovibes.com
Researchers at Nansen believe that nearly 86% of all the FTT tokens were initially controlled by FTX exchange or Alameda. Based on a new report published on November 17 by blockchain analytics firm Nansen, bankrupt crypto exchange FTX was allegedly interlinked with that of crypto trading company Alameda Research from the start.
Both entities were set up by crypto businessman Sam Bankman-Fried, who is currently being considered for extradition by the United States authorities for the role he played in the collapse of the exchange. According to the available on-chain evidence, Nansen identified multiple wallets placing Alameda as one of the earlier liquidity providers for FTX in May 2019.
Looking at the initial 350 million in its native token FTT’s supply, 27 million is said to have ended up on Alameda’s FTX deposit wallet, while the two companies controlled 86% of the supply combined. The setup meant that Very little FTT was circulating in the open market which made the tokens extremely susceptible to price manipulation.
Fast forward to about the time of the bull market of 2021 when the FTT token surged from its seed price of $0.10 to $84; Nansen thought that the two companies could not cash out their massive positions without severely spooking the markets, and possibly used their FTT positions as collateral to take out various loans.
The blockchain analytics company then pointed out nearly $1.6 billion worth of FTT being exchanged between the troubled brokerage Genesis Trading and Alameda Research in September 2021. The problem, as highlighted by Nansen, started when Alameda and FTX began reinvesting in the loans back into their FTT tokens to bid up the price, which resulted in mounting leverage.
This report continued that things seemed to work just fine until the crypto crash of June 2022. With the blowup of centralized finance (CeFi), companies like Celsius and Three Arrows Capital, which all had massive exposure to Genesis Trading, Alameda possibly encountered a liquidity Crunch that could not get resolved unless it sold its FTT tokens for cash. Nonetheless, that was not possible without crashing its price and resulting in contagion in the FTX exchange.
On-chain then indicated that more than $4 billion of FTT tokens were sent from Alameda to FTX, indicating the possibility of a loan issuance in the equivalent amount. Some participants in the crypto market believe that FTX moving customer deposits would act as an emergency liquidity injection into Alameda.
In any case, the issue eventually came to light when the CEO of Binance crypto exchange, Changpeng Zhao, decided to liquidate its leftover investments in FTX comprising of FTT. That decision quickly spooked investors and concurrently resulted in both a bank run on the FTX crypto exchange and intense selling pressure on FTT.
Soon, users noted that the funds FTX had promised were not available, resulting in the beginning of the end of what used to be the third-biggest crypto exchange globally.