Alameda Research: The Quantitative Empire Behind FTX and Its Collapse

Murky Ties with FTX and the Collateralization Scheme

A central issue in the Alameda/FTX scandal was the opaque interconnections between the two entities. Despite claims of independence, post-collapse investigations revealed that Alameda had privileged access to FTX customer funds. In practice, Alameda used customer deposits as leverage to place high-risk bets—often borrowing against or exchanging the FTX native token (FTT), which it held in massive quantities. This led to a form of circular collateralization, where illiquid assets backed enormous loans hidden from auditors and users. The system held up until November 2022, when CoinDesk published a report revealing that a majority of Alameda’s assets were tied to FTT—a token tightly controlled by FTX. Shortly afterward, Binance announced it would sell its FTT holdings, triggering a domino effect: a massive bank run and the simultaneous collapse of both FTX and Alameda.

Collapse, Investigation, and Legal Proceedings

Within days, Alameda Research ceased operations. The company filed for bankruptcy in November 2022 under Chapter 11, alongside FTX and over a hundred related entities. Investigations uncovered disastrous financial management, rudimentary (or nonexistent) accounting systems, undocumented internal loans, and misappropriation of funds for personal use (including real estate purchases in the Bahamas). Sam Bankman-Fried was arrested in December 2022, extradited to the U.S., and found guilty of fraud, money laundering, and conspiracy in November 2023. Co-founder Tara Mac Aulay had distanced herself from the company well before the scandal, citing unethical internal practices. Other executives, including former Alameda CEO Caroline Ellison, pleaded guilty and cooperated with authorities.

Lessons for the Crypto Industry

The collapse of Alameda Research shook trust in centralized crypto ecosystems. It showed that even the most “respected” players could operate without strong governance or transparency. The scandal sparked a global shift in investor, regulator, and developer expectations. Key long-term impacts include: Acceleration of global regulation of crypto exchanges. Decreased trust in native tokens used as collateral. Rise of Proof of Reserves solutions. Renewed focus on decentralized, auditable, and transparent systems. U.S. regulators (SEC, CFTC, DOJ) and authorities in other jurisdictions have since launched investigations that continue to shape the regulatory framework of the crypto sector.