FTX: Alameda Research has most of its Assets in Illiquid Altcoins

Paigambar Mohan Raj
Source: CoinDesk

According to a report by CoinDesk, FTX chief Sam Bankman-Fried‘s crypto empire might be built on shaky legs. Bankman-Fried’s empire is largely divided between his exchange, FTX, and trading firm, Alameda Research. CoinDesk has reviewed a private financial document on FTX’s sister company, Alameda Research. The study found that a majority of the assets held by Alameda are in the form of illiquid altcoins.

According to the report, most of Alameda’s balance sheet is made up of the native token, FTT. The token entitles owners to a reduction in trading costs on the exchange’s market. Alameda’s assets amounted to $14.6 billion, of which $3.66 billion was made up of unlocked FTT. Moreover, $2.16 billion in FTT collateral is the third-largest entry on the assets side of the accounting ledger.

Furthermore, other entries on the balance sheet include $3.37 billion worth of crypto. Large quantities of the native Solana blockchain cryptocurrency are held by the company, including $41 million in “SOL collateral,” $863 million in “locked SOL,” and $292 million in “unlocked SOL.” The FTX boss was an early investor in Solana. Additionally, other tokens referenced by name include MAPS, OXY, FIDA, and SRM (the token from the Serum decentralized exchange, which Bankman-Fried co-founded). Lastly, a $2 billion “investment in equity securities” and $134 million in cash and equivalents are also included.

However, the company also has liabilities of $8 billion, and FTX tokens make up a portion of that as well. The company has locked FTT worth $292 million. Also, loans totaling $7.4 billion make up the bulk of the liabilities.

Watcher Guru has reached out to FTX but has not received any response as of yet.

Is FTX a house of glass?

The illiquid asset held by FTX and Alameda does warrant the question if the firm’s foundation is solid. Illiquid assets usually raise a few eyebrows. Illiquid assets could become hard to sell due to the lack of buyers or speculators. In rough times, it could potentially lead to financial problems. Furthermore, the company holds most of its assets in illiquid altcoins, which are more volatile and risky. However, there is no hard evidence that the balance sheet reviewed by CoinDesk is the whole picture.

According to Dylan LeClair,

“The total market cap of FTT is $3.35b, & the fully diluted market cap is $8.8b. You couldn’t sell $1m of this thing without pushing the market significantly lower.”

According to Cory Klippsten from Swan Bitcoin,

“It’s fascinating to see that the majority of the net equity in the Alameda business is actually FTX’s own centrally controlled and printed-out-of-thin-air token.”

At press time FTT was trading at $25.24, down by 3.2% in the last 24 hours.