Blockchain analytics firm Nansen has conducted a thorough analysis of the events leading up to the collapse of cryptocurrency exchange FTX. The report, which was shared with Cointelegraph, sheds light on the close relationship between FTX and Alameda Research, both founded by Sam Bankman-Fried. Bankman-Fried, the former CEO of FTX, is currently facing a range of charges related to the exchange’s collapse.
The collapse of FTX is largely attributed to initial reports highlighting that Alameda held a significant 40% share of its $14.6 billion in assets in FTT tokens in September 2022. Nansen analysts have now revealed that they observed dubious on-chain interactions between FTX and Alameda prior to these reports surfacing. Between September 28 and November 1, Alameda sent $4.1 billion worth of FTT tokens to FTX, along with several continuous transfers of USD-pegged stablecoins totaling $388 million.
On-chain data also reveals that FTX held approximately 280 million FTT tokens, which accounted for 80% of the total 350 million FTT supply. The blockchain data reflects significant volumes of FTT trading, amounting to billions of dollars flowing between various FTX and Alameda wallets.
Nansen’s analysis further highlights that the majority of the FTT token supply, consisting of company tokens and unsold non-company tokens, was locked in a three-year vesting contract controlled by an Alameda-controlled wallet. With both FTX and Alameda controlling around 90% of the FTT token supply, Nansen suggests that the entities were able to support each other’s balance sheets.
The report also suggests that Alameda most likely sold FTT tokens over-the-counter and used them as collateral for loans from cryptocurrency lending firms. Nansen’s historical on-chain data shows regular large inflows and outflows between FTX, Alameda, and Genesis Trading wallets, with transfer volumes reaching up to $1.7 billion in December 2021.
The collapse of the Terra ecosystem and the subsequent bankruptcy of Three Arrows Capital (3AC) are believed to have caused liquidity issues for Alameda due to the drop in the value of FTT. To address this, Alameda allegedly obtained a covert $4 billion FTT-backed loan from FTX.
Nansen’s on-chain data indicates that the $4 billion transaction volume coincided with a $4 billion loan figure mentioned by close associates of Bankman-Fried in an interview with Reuters.
Furthermore, blockchain data reveals that Alameda would not have been able to fulfill an offer to buy FTT tokens from Binance at $22 on November 6. Binance CEO Changpeng Zhao had announced the exchange’s decision to offload its FTT tokens following negative reports about Alameda’s balance sheet.
Nansen’s report provides valuable insights into the intricate web of transactions and relationships that ultimately led to the collapse of FTX. This analysis underscores the critical role that blockchain analytics firms play in uncovering potential fraudulent activities within the cryptocurrency industry.