May 31, 2022

Hero or antagonist – why is everyone talking about Alameda research

This spring was not easy for the cryptocurrency market. The fall of several stablecoins, the collapse of Luna Foundation, and the negative impact of the traditional stock market on the cost of cryptocurrencies provoked panic and painted the candlesticks charts of all coins in red.

People tend to look for the guilty, so conversations sounded on the sidelines, and investigations and assumptions appeared on the network to whom it is beneficial. The names of the founder of the FTX exchange and the trading company Alameda Research Sam Bankman Fried sounded louder than others. We figured out what is interesting about Alameda Research and is there any reason for any accusations.

Alameda Research is a trading company founded by famous crypto community person Sam Bankman Fried in 2017. Initially, the company began to earn money on arbitration transactions with bitcoin. The company bought a cryptocurrency on the exchange in the United States and sold it at the exchange in Japan at a greater price. But the firm ran into difficulty in the beginning because Japanese banks unwillingly opened accounts for crypto companies. So, in the name Alameda appeared the “Research” prefix – for the research fund, banks opened accounts much faster.

The strategy for earnings on the difference in the price of bitcoin on exchanges in different countries is known as “Kimchi Premium”. In 2017-2018, many traders earned their capital on the exchanges in South Korea. SBF chose the same strategy, but in the market of Japan. So after a year, Alameda Research became a large trade company with a transaction volume of about $ 25 million per day.

At the same time, the Alameda team created the FTX crypto exchange. There was no convenient tool for professional traders on the market and its exchange was supposed to close this need. In addition to trading, Alameda has new tools for earnings: tokenized stocks trading, derivatives, leveraged tokens, and a convenient interface for market making.

Gradually, this turns the company into one of the most influential in the market. Alameda Research today is not only a company that provides trading services, market making, and OTC Quoting – it is also a large investment fund, which was involved in the start of many successful startups. In the portfolio of the fund are the Solana blockchain, DeFi application for deposits and savings Anchor, DEX aggregator 1inch, the Move-2-Earn project STEPN, and many others.

At first sight, Alameda Research seems just a very successful company, but its name often arises in connection with scandals of recent years. Several experts suspect the company and sometimes accuse it of manipulations of the market and the cost of cryptocurrencies, and the use of insider information to make a profit.

For example, in August of last year, an investigation was published that argued that Alameda, together with Cumberland Global company, owns more than 55% of the total emission of Tether Stablecoin (USDT). It would seem anything criminal, the firm can buy as many stablecoins as it pleases, it isn’t forbidden, but most cryptocurrencies are traded on exchanges in pairs with USDT. That allows the theoretical possibility that Alameda’s market makers can directly affect the price of almost all popular crypto assets.

The rapid growth of the popularity of the Solana blockchain is also associated with the company and directly with SBF. It is known that Alameda Research was one of the leading investors in SOL, and Sam Bankman Fried held several active promotions on his Twitter, which favorably influenced the cost of SOL and made it the 5th coin in the list of Coinmarketcap. However, this can hardly be called a scandal, that is more likely a common practice in the crypto world.

However, there are more significant accusations. In March 2021, Alameda Research exchanged mutual claims in mass media with the Reef DeFi project. The Reef team said the fund transferred tokens, which were received as part of the first tranche of financing to the Binance Exchange. This forced Reef founders to doubt the intentions of long-term cooperation and they broke the agreement. Alameda reacted with return charges of disrupting the transaction and an unfair attitude. Who was right and who was to blame did not find out, but the scandal goes sideways for the project – the price of Reef tokens after the tweet of Alameda’s CEO Sam Trabucco lost 19% within one day.

In the spring of 2022, several high-profile falls occurred in a row, in which some experts also accused the SBF’s research fund. It all started with the fall of the WAVES price – the coin of a blockchain platform with the same name. Which led to a temporary loss of pegging to the dollar exchange rate of the USD Neutrino algorithmic stablecoin.

Then the founder of WAVES Sasha Ivanov directly accused the company of manipulating the market to earn money. He claimed that Alameda Research took a large Waves tokens pool, and then organized a FUD campaign on Twitter to earn on a fall in prices. However, Ivanov does not bring sensible evidence, and Sam when he was asked by subscribers, calls the accusations a “bullshit conspiracy theory”.

The collapse of the algorithmic stablecoin UST and Luna token, unlike the fall of Waves, shocked the entire crypto market. In just a few days, many private investors and large companies suffered multimillion-dollar losses. Most mass media and investigators did not connect the incident of Terra with Alameda Research, but some bloggers and private experts did.

However, in addition to loud statements, we were not able to find obvious evidence of the fund’s involvement in this case. Several investigations appeared, including the recent by Nansen consulting company, which proves that large funds were withdrawn through the Anchor protocol a day before losing the pegging to the dollar – but the traces led to other market whales. The only thing you can suspect SBF is in dislike for algorithmic stablecoin, which he regularly writes in his long threads on Twitter.

But for some part of the community, all of the above is enough to record Alameda Research as the kingmaker of the market. Yes, the influence of Sam and his projects on the entire industry is huge, but it is not the fact that it’s bad.

Some experts on the contrary believe that Alameda is working on the growth and development of the industry, improving the system and market security. Even if we assume that the company is related to the manipulation of the market, at that moment it is not illegal, because there are no laws and regulations as such.

The panic around algorithmic stablecoins once again proves that the technology for reinforcing the volatile asset with other volatile assets is too raw and can only harm the market. If the asset is easy to collapse, then it cannot be called stable and for the sustainability of the entire system, it is better to get rid of such projects.