Insiders at Alameda Research only found out the trading firm was on the verge of implosion because of a confession from former CEO Caroline Ellison, not internal warning signs, a former engineer for the company shared during a recent interview on CoinDesk TV.
“It pretty much seemed like business as usual, right up until the end. The days before the company collapsed, it just seemed like a few really busy days of trading,” Aditya Baradwaj, a former Alameda employee, said on CoinDesk TV. “We had no idea that anything was going on until the very last day, and that's when Caroline pulled us aside and told us what had been going on behind closed doors.”
Alameda was a cryptocurrency trading fund set up by Sam Bankman-Fried, Caroline Ellison, and Sam Trabucco. Although Bankman-Fried attempted to put some distance between Alameda and its sister company, cryptocurrency exchange FTX, ultimately, it was revealed that the two were bound at the hip when CoinDesk reported that divisions between the two firms were blurry as a material amount of Alameda's balance sheet comprised of FTX's FTT exchange token.
Ultimately, those revelations resulted in the collapse of both Alameda and FTX along with criminal charges against Bankman-Fried. His trial on fraud and conspiracy charges kicked off Wednesday.
CoinDesk verified that Baradwaj was an employee of Alameda by reviewing payslips he provided.
Baradwaj also said that the internal security practices as well as checks and balances at the trading firm were quite poor, which resulted in a “fat finger” trade in 2021 that caused the price of bitcoin to temporarily dip by up to 87%.
CoinDesk reported at the time, also citing Baradwaj, that a misplaced decimal caused a large trade to go through which sold bitcoin for pennies on the dollar.
"Alameda's poor security and risk checks stood out, especially when you consider that traditional firms would've had these measures in place,” he said during the interview. “The environment at both Alameda and FTX was one where huge monetary decisions were made with minimal oversight. While there were many issues, we never expected outright illegal activities."
In Michael Lewis’ ‘Going Infinite,’ the author notes that “FTX had switched off Alameda’s risk limits to make itself more appealing,” later writing that the “losses caused by this unsettling policy were in any case trivial.”
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 Block.one; 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 offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.