On November 22, 2022, Bitcoin enthusiast and on-chain data explorer Lucas Nuzzi posted a message on his Twitter page about Samuel Bankman Fried’s collapsed crypto business and how it was related to the $570 million Binance hack.
4/ Their approach was similar w.r.t ERC 20 tokens, which were also frequently sent cross-chain via bridges
They sent a total of $9.5 billion to bridges alone(!!!). We're still investigating the extent to which they might have lost user funds as a result of bridge hacks. pic.twitter.com/6RfamMUVxr
— Lucas Nuzzi (@LucasNuzzi) November 22, 2022
Late in the day, Lucas, who is also in charge of research and development at the well-known cryptocurrency asset analytic platform Coinmetric, made this information public.
He started his tweet by saying he and his colleagues at Coinmetric have been intrigued for many weeks about the way FTX and its sister company lost billions of dollars of users’ funds.
Further research led them to a possible reason: Alameda is a crypto platform that offers services like borrowing and lending and involves multiple ecosystem cross-chain bridges.
On bridges alone, Alameda sent a whopping sum of $9.5 billion. Many bridges were attacked in the past year, and Alameda likely was affected. They are still unsure, though, of the exact financial hit the platform sustained from users.
According to their analysis, it was possible that when Terra crashed, both Alameda and FTX were severely low on liquidity.
To save face, the platform decided to fall back on FTT, transferring it between themselves, and as long as the token kept doing well, they could borrow collateral-backed loans using FTT.
Before CoinDesk, a website that publishes news about cryptocurrencies published an article revealing FTT as FTX’s most prominent position and endangering the platform. This most likely took place for a while.
According to their prognosis, a whale investor had been sending large amounts of USDT to save FTT from falling first to $23, then to $10; the investor is likely to be Alameda, and the funds used in propping up the price were likely users’ funds.
They also believed that the same user funds were used on FTT earlier that year, which is why it performed better than most assets.
When the Binance platform experienced a cross-chain exploit in October 2022, Alameda prop funds likely took part in the hit as Binance the exchange lost over $570 million in the attack.
However, that was not enough to wipe out all of the customers’ funds. Their hypothesis was that wrong trades were likely leveraged, stablecoin dominated lending markets, and cross-chain bridges meant either the native token lost value or it was hacked.
All these activities were possibly the leading factors that made FTX and Alameda lose a lot of user funds in early 2022, and when Binance was hacked, it lost millions of customers’ funds.
FTX was also hacked a day after it declared bankruptcy, losing over $600 million; however, many believed that it was the last move pulled by an insider before everything collapsed.
Nevertheless, there is no concrete proof to support such a theory.
