Alameda Had ‘Secret Exemption’ From FTX Liquidation Protocols, New CEO Says

John Ray detailed a litany of management failings at the crypto exchange, which collapsed after revelations about its relationship with its trading arm

AccessTimeIconNov 17, 2022 at 3:18 p.m. UTC
Updated May 9, 2023 at 4:03 a.m. UTC

Alameda Research, the trading vehicle at the center of Sam Bankman-Fried’s and FTX’s downfall, had a “secret exemption” from the crypto exchange’s liquidation procedures, according to bankruptcy filings Thursday.

The revelation in a court filing, though scant on details, would indicate that Alameda held an advantage when making risky leveraged trades on FTX. Crypto derivatives exchanges such as FTX automatically sell the collateral of traders who borrowed its money to place bets that turned south.

John J. Ray III, the new CEO of FTX who characterized Alameda as a "crypto hedge fund," cited “the secret exemption of Alameda from certain aspects of’s auto-liquidation protocol” among a list of poor security and financial controls that have been uncovered since he took control of the company in the early hours of Nov. 11, shortly before it filed for bankruptcy in a U.S. court.

The blurred lines between Alameda and FTX, two supposedly separate businesses, has proved crucial in the collapse of the company. It was the revelation by CoinDesk that Alameda’s balance sheet was stuffed with FTX-issued tokens that led to questions about the company’s financial health, eventually snowballing into insolvency.

The allegations are part of a litany of poor management practices highlighted by Ray, previously responsible for sweeping up the mess left by Enron, who said FTX was the worst failure of internal controls and record-keeping he has seen in his 40-year career.

Ray also highlighted practices such as registering Bahamas real estate in employees’ names using company funds, and managers approving disbursements by posting emojis on an internal chat platform.

UPDATE (Nov. 18, 08:39 UTC): Changes description of Alameda's activities in first, third paragraphs.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.