Is billionaire Sam Bankman-Fried's crypto empire built on self-dealing?

The largest asset on the balance sheet of billionaire Sam Bankman-Fried is his own crypto tokens worth $3.66 billion. The third biggest asset? Also his token, "FTT collateral" amounting to $2.16 billion. “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,” Cory Klippsten reports.

November 3, 2022

7 Minutes

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Meet billionaire Sam Bankman-Fried. Forbes not so subtly proclaimed him "The World's Richest 29-Year-Old." But is that even remotely true?

Bankman-Fried's crypto empire is officially divided into two parts: FTX (his exchange) and Alameda Research (his trading firm).

Even though they're technically supposed to be two separate companies, the division breaks down on Alameda's balance sheet.

On that balance sheet, there's FTX - specifically, the FTT token, which grants holders a discount on trading fees.

Despite the fact that there's nothing wrong with that, it shows Bankman-Fried's trading giant Alameda is built largely on a cryptocurrency invented out of thin air, by a sister company, not an independent asset like a fiat currency.

This adds to the alarming systemic risk evidence that FTX and Alameda are close.

Alameda's financials confirm what industry watchers already know, it's a massive unregulated monster.

The company had $14.6 billion in "assets" as of June 30.

However, its biggest asset is, well, itself.

The third-largest asset on the assets side of the ledger is $3.66 billion of "unlocked FTT." That's $2.16 billion of "FTT collateral."

It has more FTX tokens among its $8 billion of liabilities: $292 million of "locked FTT." (The liabilities are mostly loans.)

“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,” reported Cory Klippsten.

Caroline Ellison, CEO of Alameda, wouldn't comment. We didn't hear back from FTX.

As for the balance sheet, it's got $3.37 billion of "crypto held" and a lot of Solana's native token: $292 million "unlocked SOL," $863 million "locked SOL" and $41 million "SOL collateral." Bankman-Fried was an early investor in the company.

Other potential self-dealing tokens mentioned by name are SRM (the token from Serum, the decentralized exchange Bankman-Fried cofounded), MAPS, OXY and FIDA.

In addition to all these tokens, the company only has $134 million in cash according to third parties.

Also, tokens might not be worth much. Alameda says "locked tokens are conservatively treated at 50% of fair value."

With the FTT token, you get discounts on FTX trading fees, more commissions on referrals, and rewards. According to FTX, FTT's value is maintained by their rolling program of buying back and burning tokens, which eats up a third of their trading commissions and will continue to do so until half of the tokens are burned.