BitDAO Community Asks Alameda for Proof of Funds After BIT's Sudden 20% Drop

The BitDAO community has said that it will vote on what to do with its FTT tokens if Alameda fails to provide evidence that it continues to hold BIT tokens as promised. Alameda has promised to provide the evidence soon.

AccessTimeIconNov 8, 2022 at 6:16 a.m. UTC
Updated Nov 9, 2022 at 3:49 p.m. UTC

Omkar Godbole was a senior reporter on CoinDesk's Markets team.

CORRECTION (Nov, 8, 06:57 UTC): Corrects headline and story to say BitDAO has suggested voting on the FTT tokens, not threatened Alameda directly. Corrects dek to say BIT token, not FTT.

BitDAO, one of the largest decentralized autonomous organizations (DAO), entered the FTX-Alameda drama on Tuesday after the DAO's native token BIT slipped 20%.

The community behind BITDAO, which is supported by crypto exchange Bybit, Pantera, billionaire Peter Thiel and several other funds, asked trading firm Alameda to prove it continues to hold 100 million BIT tokens the DAO acquired in November of last year by converting 3.36 million FTT tokens. The token swap deal required Alameda to hold tokens for at least three years.

"BitDAO community is questioning the sudden dump of $bit token caused by Alameda dumping and breaching the 3 yr mutual no sale public commitment. Nothing is confirmed but BitDAO community would like to confirm proof of funds from Alameda," Bybit's co-founder Ben Zhao tweeted.

BitDAO's fears perhaps stem from speculation that Alameda is liquidating its other token holdings to defend FTX's native cryptocurrency.

FTTT has dropped 40% to $15 in four days. The FTX-Alameda drama began last week after CoinDesk reported that Alameda held large amounts of FTT tokens on its balance sheet. In response, Binance moved to liquidate its FTT holdings, triggering market panic.

BitDAO community also issued a veiled threat to take action, perhaps sell the acquired 3,362,315 FTX tokens, in case Alameda does not offer clarification in 24 hours.

"If this request is not fulfilled, and if sufficient alternative proof or response is not provided, it will be up to the BitDAO community to decide (vote, or any other emergency action) how to deal with the $FTT in the BitDAO Treasury," the proposal said.

Responding to Zhou's tweet, Alameda Research's CEO Caroline Ellison said, "that wasn't us," and promised to provide the proof of funds once things calm down. Zhou thanked Ellison for the quick response, saying "it gives a lot of confidence to the BitDAO community.

Ellison's assurance has certainly calmed market nerves. BIT token has recovered to trade at 38 cents, having dropped over 20% to 26 cents early Tuesday, data from charting platform TradingView show.

BitDAO has also introduced a proposal that will allow the community to monitor and verify that the FTT-BIT swap commitments are being followed.

UPDATE (Nov, 8, 07:02 UTC): Adds details on BitDAO proposal in the tenth paragraph.

UPDATE (Nov, 8, 06:32 UTC): Adds details on BitDAO's community proposal and response from Zhao.

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Omkar Godbole was a senior reporter on CoinDesk's Markets team.

CoinDesk - Unknown

Omkar Godbole was a senior reporter on CoinDesk's Markets team.