What do Alameda, FTX, and Sam Bankman-Fried Have in Common?

it's not a Silicon Valley robotics lab. It's one of the largest and most influential cryptocurrency trading firms in the world. Alameda was founded by Sam Bankmin Freed, or SPF as he's known. The trading firm operates out of the Bahamas, along with the rest of the SPF empire. With a modest team of only thirty employees, Alameda pocketed over one billion dollars in profit in the last year. The firm and its employees have, for the most part, preferred not

to draw too much attention. In recent months, though, it's gotten harder for Alameda to fly under the radar, as the collapse of crypto has revealed a tangle of connections between Alameda FTX and the broader virtual currency markets. As Alameda's influence, spreads and connections emerged, so have concerns over potential conflicts of interest. Bloomberg reporter Hannah Miller joins me, Now, these are two companies founded by the same person and at that point managed in part by the same person.

As we attempt to unentangle these connections, Hi, Hannah, Hianna, how's it going. So let's set the scene. First of all, what is Alameda Research and what do they do well? Alameda Research, You know, the name sounds more like some Silicon Valley startup dedicated to robotics or something like that, a little bit of a mysterious name, but it is actually a quantitative trading firm that specializes in crypto, and it purposefully chose that name to kind of fly under

the radar, you know, be something a little mysterious. And uh, they've actually taken the crypto world by storm. So where are they based and how have they grown into such a big and prominent player in in crypto? What's their history? They're currently based on the Bahamas. They were founded in California, in Berkeley, then moved over to Hong Kong and then went to the Bahamas to establish a new headquarters. And they are of the top crypto native market makers in

the industry. Uh, they're comparable to I would say, Jump Crypto, Winter Mute, if you guys know those names. And they're really just an incredible player, especially considering that they have a very small team of only thirty people. His research among the things that they do. Research is among the things that they do, but a lot of that research has kept internally. It's not published in reports or things

like that. But basically they do conduct research on the crypto market in order to develop algorithms that help them trade more effectively. So I guess it's worth telling our listeners, you know, who might not be familiar that that they're they're not like a fund. They trade their own money like they're prop trading firm, right exactly, and they do some other things to like venture investing, though that has

recently changed. Um And they are also known for being founded by Sam bank and Freed, one of the biggest names in digital assets. Five years same bankman went Free and went from buying his first big cooin to becoming a multibillionaire. The ft X founder is now worth an estimated eleven billion dollars. It is just fascinating to see, uh, you know, just how ambitious and seemingly successful as WEF

has seemed to be. They called the JP Morgan of crypto, right, the Michael Jordan of crypto if you will, Uh, Sam, So, what kind of relationship do Alameda and FTX have. It's an interesting relationship. You know, they are in very close proximity with each other. They're both based on the same corporate campus in the Bahamas, in separate buildings, and the

employees also have close relationships. Sam and has has worked very closely with Alameda's CEO, Caroline Ellison, and they've actually, you know, we've had Alameda employees and FTX employees lived together at one point in time. So what is Sam's role now with Alameda because he was once the seal. Yes, Sam step back from Alameda in October. He named two

co CEOs, Caroline Ellison and Sam Tropuco. Sam Tropuco recently stepped down as co CEO of Alameda, so Caroline now has soul control of the company, but Sam bankman Fried is likely still a majority owner. Of the firm. So, how has Alameda's relationship to fd X changed in the sense like it's business ties, right, How is that evolved?

What does it do on fd X? Now? Yeah, so Alameda was founded before f t X. When ft X was trying to get off the ground as a crypto exchange, they needed a market maker and they had Alameda be the main market maker on ft X, which is pretty interest staying because you wouldn't necessarily see that kind of relationship in traditional finance. These are two companies founded by the same person and at that point managed in part by the same person. But since then Alameda has dropped down.

It is no longer the top market maker on ft X according to both Bank then Freed and Ellison, and it still does market making on ft X. It's actually one of the top depositor of stable coins on the platform according to some data analytics that we collected on writing the story. So why have there been concerns about

potential conflicts of interest? And obviously, you know, we want to be clear that we're saying potential and concerns and there's no evidence that there is any direct conflict that has arisen or any any wrongdoing but you know, why have people why are people in the market discussing this, and what have they told you? I guess yeah, market watchers are concerned about the potential for Alameda to get

preferential treatment on ftx UM. But when talking to Ellison and talking to Bank and Freed, you know, they said that they treat Alameda the same way as they would any other market maker, that there's no you know, special preference for Alameda. When talking to bank men, Freed and Ellison both emphasized that there are clear barriers between the

two companies. Uh, they have separate offices even though they're on the same campus, and there are corporate policies in place to prevent employees from one company from sharing trading or customer information with employees of the other. So they have taken steps to sort of silo off the two companies from each other. Alameda is less of a known name compared to ft X, which is, you know, a retail trading platform, as you said, and they're they're advertising

is everywhere. They have billboards. They had an ad on the Super Bowl. But you know, Alamida has been not in the shadows, but has been less prominent before, which is kind of typical for a market maker, right, you have that in financial market makers are big, but they don't really do pr do advertising because in a way they don't need to because they're trading their own money, so they need don't need to attract investment from outside. Um,

So why have they become more prominent recently? Like how have they emerged and like how have their connections emerged more in this particular moment in crypto? Yeah, well, their founder, Sam bankman Fried has just really gained prominence within the past year or so, both within crypto and within chech and finance more broadly. You know, he's appearing in Vogue ads with Gazelle bunch In, he is doing interviews, he's testifying before Congress a crypto regulations. He is pretty much everywhere.

When you look at crypto, so Alameda, you know, his baby, his first company, UH is pretty interesting to look at, and they're they're becoming a more prominent player. They had one billion dollars in profit last year. And then it's interesting to Caroline Ellison is very much a different kind of leader and Sam bankman Fried Uh bank Man Freed is always putting himself out there, super active on crypto Twitter again doing interviews all the time. Ellison is a

bit more mysterious. She doesn't have as much of a social media presence. Uh, you know, she's starting to have, I guess a more external facing role with Alameda now that San Trabuco has left the company. We'll be right back with Bloomberg reporter Hannah Miller. More pain in the world of crypto Voyager digital files for chapter eleven bankruptcy protection just days after the broker suspended withdrawals on the plant and also sort of broke Whige firm. What does

it mean that they're falling from bankruptcy protection? So another thing that has happened in this Crypto winter has been bankruptcies, right, And what role have UM, Alameda, SPF, and FTX played in this and how are those roles somewhat interconnected at times? Well, Bakman Fried has been referred to as a bailout king cryptos JP Morgan. He's really stepped in and been the architect of various bailouts that have helped struggling platforms affected

by crypto Winter. We spoke to him about the Voyager deal UM where they put in an emergency credit line to this struggling crypto lending platform. It ended up not being enough to help Voyager. The company did still file for bankruptcy and now they're you know, different companies, including f t X and Alameda in a joint venture, are bidding to buy Voyagers assets, and it's actually gotten pretty contentious between different parties, with Voyager calling Alameda and f

t X is offer a low ball bid. So one of the things you mentioned was how there are differences between you know, crypto markets and traditional markets as usual. How are these firms regulated and how is it different from traditional finance. The crypto regulatory landscape is constantly changing. We still don't know which regulator is going to be primarily in charge of digital assets. The SEC and the

CFTC have been vying for control over the industry. One thing that we do know is that more oversight is going to be put in place very soon. Again, as I mentioned, Bank and Freed has been active and testifying before Congress and advocating for the industry and asking for

more regulatory clarity. I think it's possible that there will be rules and regulations put in place that helped prevent tight relationships between companies that do business with each other, and it remains to be seen whether that could potentially affect ALMITA and f t X. So Alameda is a prop trading firm, but they have also played a big role in venture investing. How does that work and how is that shifted? Right, because you had a big story

recently about that too. Yeah, Alameda has been a big name in venture capital investing, supporting emerging startups like Anchorage Digital, which is a crypto bank, and Magic Eden, which is an n f T marketplace. Uh, they're big name investor, so it's really interesting when I spoke with Wilson who said that Alameda was actually shifting over much of its venture operations to ft X Ventures, and that's the venture arm of f t X, which launched earlier this year

in January. And I confirmed that with the head of ft X Ventures, Amy Wou, who said that they were really taking on the startup investing from Alameda, that they had brought over one of Elamida's employees to help with that. And crypto venture capital is just a super fascinating space. A lot of investors are still very bullish on the crypto industry um, but it'll be interesting to see you know how startups do with uh this prolonged crypto winter.

Thank you Hannah for joining me today. You can find more of Hannah Miller's reporting on the Bloomberg Terminal, on Bloomberg dot com and on Twitter. She's at h jeep Miller. I'm an Area Bloomberg Crypto senior editor in today for Stacy Murray Ishmael. On the next episode of Bloomberg Crypto, I'm Emily Nicole, crypto blogger for Bloomberg News, and tomorrow I'll be in the Stacey Murray Ishmael. Did you know

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