There was a frontrunning of FTX token listings by Alameda Research: report


Written by

Edna Buckley
Published on

November 15, 2022

Key points:

  • Alameda Research was speculating on tokens with prior knowledge of their future listing on FTX. 
  • They held 18 different tokens worth $60 million, which were finally listed on FTX.
  • There were the same cases from OpenSea and Coinbase, but Alameda's violation is potentially the biggest one.

According to an analysis by crypto compliance firm Argus, Alameda Research leveraged prior knowledge of tokens that would be listed on FTX, buying them ahead of public announcements and then selling them at a profit.

From the beginning of 2021 to March of this year, Alameda held 18 different tokens worth $60 million, which were finally listed on FTX. The analysis was first mentioned in a report in The Wall Street Journal on Monday. 

Alameda Research is a quantitative trading firm founded in 2017 by Sam Bankman-Fried. He founded FTX, a now-bankrupt cryptocurrency exchange, in 2019 before retiring from day-to-day operations in Alameda in 2021. Fried claimed that the two companies were separate entities, but the bank run that forced FTX to suspend payments and eventually file for bankruptcy stemmed from the fact that a large portion of Alameda’s balance sheet was made up of FTT (the FTX exchange token).

Argus is a London-based company founded last year with investors including venture capital giants Y Combinator and Charles River Ventures.

"What we're seeing is that they almost always buy positions in the preceding month that they've never done before," Argus co-founder Omar Amjad told The Wall Street Journal. "Clearly there is something in the market telling them to buy something they didn't have before."

It’s a model for other cryptocurrency companies like NFT marketplace OpenSea and publicly traded cryptocurrency exchange Coinbase. Law enforcement didn't take it very well.

Former OpenSea product manager Nate Chastain is the first digital asset trader to be charged with an insider trading scheme, according to the U.S. Department of Justice. Last year, he allegedly used insider information about which NFT collections would be featured on the marketplace’s homepage for his own benefit. After being arrested and charged in June, he moved to have the case dismissed on the grounds that NFTs were “neither securities nor commodities,” but a judge denied his motion.

In April, crypto Twitter personality and podcast host Cobie flagged an Ethereum wallet that purchased $400,000 worth of tokens, just before a public blog post announced that it was considering a listing on Coinbase. Two weeks later, Coinbase CEO Brian Armstrong announced in a blog post that the company would no longer identify assets it was considering listing.

In July, the Justice Department charged former Coinbase product manager Ishan Wahi with conspiracy to commit wire fraud. On the same day, the SEC also filed charges against Wahi for sharing the unpublished listing announcement with his brother Nikhil Wahi and friend Sameer Ramani.

If the allegations against Alameda Research are true, it would mean the company pushed for an IPO on a scale larger than the former OpenSea or Coinbase executives who have already been indicted.

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