What We Know About Alameda Research’s Illiquid Investments

Who or what has been brought to light?

•In the months before FTX’s collapse, it was revealed that the crypto exchange had diverted $4 billion of company funds to prop up its struggling sister trading firm, Alameda Research.

• On Tuesday, the Financial Times detailed some $5.4 billion worth of Alameda’s investment portfolio — over 500 illiquid investments made by the firm across 10 holding companies as of early last month.

• The majority of the companies listed were crypto and decentralized finance ventures, but documents reveal that Alameda also invested in projects and companies far outside its stated Web3 mandate.

• Some notable examples include a produce company specializing in lettuce and strawberries ($25 million), a weight loss drug ($500,000), and knockoff versions of lotions once peddled by long-defunct cosmetics brand Goubaud de Paris ($1 million).

• Alameda also appeared to have a particular appetite for Chinese media companies, investing $5 million in one news site and $3.56 million in another.

• After May’s crypto crash (which Bankman-Fried attempted to cover up with secret infusions from FTX), it remains unclear how much money was lost by Alameda through its various investments over the years.

FTX Collapse and weird investments

FTX’s dramatic collapse sent shockwaves throughout the crypto community, and left many investors wondering what went wrong. Now, recent reporting from the Financial Times has shed some light on what was taking place in the months prior to the exchange’s demise: a massive diversion of $4 billion worth of company funds to prop up its struggling sister trading firm, Alameda Research. Let’s dive into what we know about Alameda’s illiquid investments so far.

Alameda is an investment firm that specializes in decentralized finance projects. Documents obtained by the Financial Times have revealed that it has invested heavily outside its stated Web3 mandate and was holding over 500 illiquid investments totaling $5.4 billion across 10 different holding companies as early as last month. 

Alameda invested $1 million in lotions once peddled by defunct cosmetics brand Goubaud de Paris and $25 million in a produce company specializing in lettuce and strawberries. The company invested $25 million in 80 Acres, a produce company specializing in growing and selling lettuce and strawberries in the Ohio region, for an undisclosed amount of equity in the company. They also appear to have an appetite for Chinese media companies, investing $5 million in one news site and $3.56 million in another. Another $500,000 went to Equator Therapeutics, a company developing a weight loss drug, and $1.5 million to Ivy Natal, a San Francisco-based fertility company.

Favors upon favors

The Financial Times documents also show that Alameda had made investments into entities related to its own founders — CEO Sam Bankman-Fried and COO Tianhao Zhou — as well as to their family members. In addition, there were investments into entities owned by friends of Bankman-Fried and Zhou who are not involved with Alameda or FTX. It is unclear at this time how much money was lost through these various investments or whether any of them will be able to be recovered.

It was absolutely shocking to the cryptocurrency community that FTX finally admitted to diverting $4 billion of company funds into propping up its ailing sister trading firm as well, Alameda Research. This drastic move created a wave of outrage amongst investors who had placed significant trust in their platform and felt betrayed by what appeared to be flagrant misconduct. To make matters worse, subsequent revelations revealed that many key figures within the company had turned a blind eye to these practices, giving rise to suspicions of foul play in many quarters. Although long-term consequences are still being discussed and speculated upon, it is clear that FTX’s misappropriation of funds will have forever changed how we view crypto exchanges in the future.

Alameda claims due diligence

Alameda has stated that all of their investments were conducted with due diligence and that they followed legal guidelines for proper disclosure when making their deals publically available, but it remains unclear how much risk they took on while making these decisions, or how they can be sure they won’t suffer more losses down the line if those risks do not pan out favorably for them. Additionally, many investors are now asking why such risky investments were allowed to take place without appropriate oversight from either FTX or Alameda management teams — especially given the amount of money involved and the fact that FTX had already suffered significant losses prior to these deals being made publically known.

Sam points his finger at his odd partner

Sam Bankman-Fried claims that he had no knowledge about any of the investments made by Alameda or how the money was lost and instead has pointed the finger at his on and off again girlfriend ex-Alameda CEO Caroline Ellison who as it turns out doesn’t know much about crypto or how to handle a multi-billion dollar business. 

Ellison and Bankman-Fried’s relationship has been the subject of intense speculation since they — along with eight other FTX and Alameda executives — once shared a Bahamas penthouse. This was before both companies crashed last month and Ellison resurfaced in New York. The recent controversy around her follows an especially scandalous blog linked to her that not only described cryptocurrencies as “mostly scams and memes” but also explored discredited fields of race science and promoted polyamorous relationships modeled on the structure of imperial Chinese harems. Needless to say, Ellison’s involvement with Bankman-Fried may serve as a cautionary lesson for investors seeking alternative investment options.

What now?

The collapse of FTX left many investors wondering what went wrong — now we know at least part of it had to do with risky investments made by sister trading firm Alameda Research outside its stated Web3 mandate without appropriate oversight from either FTX or Alameda management teams. While some details still remain unclear — such as how much money has been lost through these deals — investors should be aware of just how much risk can be taken on when executing certain business decisions without proper checks and balances put into place first. With this knowledge in hand, website owners who deal with cryptocurrencies can make sure they are aware of potential risks before engaging in any potentially high-stakes trades — so as not to suffer a similar fate as FTX did earlier this year!


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