Speaker 1: This is Bloomberg Crypto Daily Bloomberg I heard podcast and
Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News.
Speaker 1: It's Tuesday, September twenty seven. I'm Anna, a senior crypto
Speaker 1: editor for Bloomberg News. In today for Stacy Marie Ishmael.
Speaker 1: You may have heard of Cryptocurrency Exchange f TX, and
Speaker 1: you may have heard of its CEO and founder, Sam
Speaker 1: Bankman Freed. But have you heard of Alameda Research. No,
Speaker 1: it's not a Silicon Valley robotics lab. It's one of
Speaker 1: the largest and most influential cryptocurrency trading firms in the world.
Speaker 1: Alameda was founded by Sam Bankmin Freed, or SPF as
Speaker 1: he's known. The trading firm operates out of the Bahamas,
Speaker 1: along with the rest of the SPF empire. With a
Speaker 1: modest team of only thirty employees, Alameda pocketed over one
Speaker 1: billion dollars in profit in the last year. The firm
Speaker 1: and its employees have, for the most part, preferred not
Speaker 1: to draw too much attention. In recent months, though, it's
Speaker 1: gotten harder for Alameda to fly under the radar, as
Speaker 1: the collapse of crypto has revealed a tangle of connections
Speaker 1: between Alameda FTX and the broader virtual currency markets. As
Speaker 1: Alameda's influence, spreads and connections emerged, so have concerns over
Speaker 1: potential conflicts of interest. Bloomberg reporter Hannah Miller joins me, Now,
Speaker 1: these are two companies founded by the same person and
Speaker 1: at that point managed in part by the same person.
Speaker 1: As we attempt to unentangle these connections, Hi, Hannah, Hianna,
Speaker 1: how's it going. So let's set the scene. First of all,
Speaker 1: what is Alameda Research and what do they do well?
Speaker 1: Alameda Research, You know, the name sounds more like some
Speaker 1: Silicon Valley startup dedicated to robotics or something like that,
Speaker 1: a little bit of a mysterious name, but it is
Speaker 1: actually a quantitative trading firm that specializes in crypto, and
Speaker 1: it purposefully chose that name to kind of fly under
Speaker 1: the radar, you know, be something a little mysterious. And uh,
Speaker 1: they've actually taken the crypto world by storm. So where
Speaker 1: are they based and how have they grown into such
Speaker 1: a big and prominent player in in crypto? What's their history?
Speaker 1: They're currently based on the Bahamas. They were founded in California,
Speaker 1: in Berkeley, then moved over to Hong Kong and then
Speaker 1: went to the Bahamas to establish a new headquarters. And
Speaker 1: they are of the top crypto native market makers in
Speaker 1: the industry. Uh, they're comparable to I would say, Jump Crypto,
Speaker 1: Winter Mute, if you guys know those names. And they're
Speaker 1: really just an incredible player, especially considering that they have
Speaker 1: a very small team of only thirty people. His research
Speaker 1: among the things that they do. Research is among the
Speaker 1: things that they do, but a lot of that research
Speaker 1: has kept internally. It's not published in reports or things
Speaker 1: like that. But basically they do conduct research on the
Speaker 1: crypto market in order to develop algorithms that help them
Speaker 1: trade more effectively. So I guess it's worth telling our listeners,
Speaker 1: you know, who might not be familiar that that they're
Speaker 1: they're not like a fund. They trade their own money
Speaker 1: like they're prop trading firm, right exactly, and they do
Speaker 1: some other things to like venture investing, though that has
Speaker 1: recently changed. Um And they are also known for being
Speaker 1: founded by Sam bank and Freed, one of the biggest
Speaker 1: names in digital assets. Five years same bankman went Free
Speaker 1: and went from buying his first big cooin to becoming
Speaker 1: a multibillionaire. The ft X founder is now worth an
Speaker 1: estimated eleven billion dollars. It is just fascinating to see, uh,
Speaker 1: you know, just how ambitious and seemingly successful as WEF
Speaker 1: has seemed to be. They called the JP Morgan of crypto, right,
Speaker 1: the Michael Jordan of crypto if you will, Uh, Sam, So,
Speaker 1: what kind of relationship do Alameda and FTX have. It's
Speaker 1: an interesting relationship. You know, they are in very close
Speaker 1: proximity with each other. They're both based on the same
Speaker 1: corporate campus in the Bahamas, in separate buildings, and the
Speaker 1: employees also have close relationships. Sam and has has worked
Speaker 1: very closely with Alameda's CEO, Caroline Ellison, and they've actually,
Speaker 1: you know, we've had Alameda employees and FTX employees lived
Speaker 1: together at one point in time. So what is Sam's
Speaker 1: role now with Alameda because he was once the seal. Yes,
Speaker 1: Sam step back from Alameda in October. He named two
Speaker 1: co CEOs, Caroline Ellison and Sam Tropuco. Sam Tropuco recently
Speaker 1: stepped down as co CEO of Alameda, so Caroline now
Speaker 1: has soul control of the company, but Sam bankman Fried
Speaker 1: is likely still a majority owner. Of the firm. So,
Speaker 1: how has Alameda's relationship to fd X changed in the
Speaker 1: sense like it's business ties, right, How is that evolved?
Speaker 1: What does it do on fd X? Now? Yeah, so
Speaker 1: Alameda was founded before f t X. When ft X
Speaker 1: was trying to get off the ground as a crypto exchange,
Speaker 1: they needed a market maker and they had Alameda be
Speaker 1: the main market maker on ft X, which is pretty
Speaker 1: interest staying because you wouldn't necessarily see that kind of
Speaker 1: relationship in traditional finance. These are two companies founded by
Speaker 1: the same person and at that point managed in part
Speaker 1: by the same person. But since then Alameda has dropped down.
Speaker 1: It is no longer the top market maker on ft
Speaker 1: X according to both Bank then Freed and Ellison, and
Speaker 1: it still does market making on ft X. It's actually
Speaker 1: one of the top depositor of stable coins on the
Speaker 1: platform according to some data analytics that we collected on
Speaker 1: writing the story. So why have there been concerns about
Speaker 1: potential conflicts of interest? And obviously, you know, we want
Speaker 1: to be clear that we're saying potential and concerns and
Speaker 1: there's no evidence that there is any direct conflict that
Speaker 1: has arisen or any any wrongdoing but you know, why
Speaker 1: have people why are people in the market discussing this,
Speaker 1: and what have they told you? I guess yeah, market
Speaker 1: watchers are concerned about the potential for Alameda to get
Speaker 1: preferential treatment on ftx UM. But when talking to Ellison
Speaker 1: and talking to Bank and Freed, you know, they said
Speaker 1: that they treat Alameda the same way as they would
Speaker 1: any other market maker, that there's no you know, special
Speaker 1: preference for Alameda. When talking to bank men, Freed and
Speaker 1: Ellison both emphasized that there are clear barriers between the
Speaker 1: two companies. Uh, they have separate offices even though they're
Speaker 1: on the same campus, and there are corporate policies in
Speaker 1: place to prevent employees from one company from sharing trading
Speaker 1: or customer information with employees of the other. So they
Speaker 1: have taken steps to sort of silo off the two
Speaker 1: companies from each other. Alameda is less of a known
Speaker 1: name compared to ft X, which is, you know, a
Speaker 1: retail trading platform, as you said, and they're they're advertising
Speaker 1: is everywhere. They have billboards. They had an ad on
Speaker 1: the Super Bowl. But you know, Alamida has been not
Speaker 1: in the shadows, but has been less prominent before, which
Speaker 1: is kind of typical for a market maker, right, you
Speaker 1: have that in financial market makers are big, but they
Speaker 1: don't really do pr do advertising because in a way
Speaker 1: they don't need to because they're trading their own money,
Speaker 1: so they need don't need to attract investment from outside. Um,
Speaker 1: So why have they become more prominent recently? Like how
Speaker 1: have they emerged and like how have their connections emerged
Speaker 1: more in this particular moment in crypto? Yeah, well, their founder,
Speaker 1: Sam bankman Fried has just really gained prominence within the
Speaker 1: past year or so, both within crypto and within chech
Speaker 1: and finance more broadly. You know, he's appearing in Vogue
Speaker 1: ads with Gazelle bunch In, he is doing interviews, he's
Speaker 1: testifying before Congress a crypto regulations. He is pretty much everywhere.
Speaker 1: When you look at crypto, so Alameda, you know, his baby,
Speaker 1: his first company, UH is pretty interesting to look at,
Speaker 1: and they're they're becoming a more prominent player. They had
Speaker 1: one billion dollars in profit last year. And then it's
Speaker 1: interesting to Caroline Ellison is very much a different kind
Speaker 1: of leader and Sam bankman Fried Uh bank Man Freed
Speaker 1: is always putting himself out there, super active on crypto
Speaker 1: Twitter again doing interviews all the time. Ellison is a
Speaker 1: bit more mysterious. She doesn't have as much of a
Speaker 1: social media presence. Uh, you know, she's starting to have,
Speaker 1: I guess a more external facing role with Alameda now
Speaker 1: that San Trabuco has left the company. We'll be right
Speaker 1: back with Bloomberg reporter Hannah Miller. More pain in the
Speaker 1: world of crypto Voyager digital files for chapter eleven bankruptcy
Speaker 1: protection just days after the broker suspended withdrawals on the
Speaker 1: plant and also sort of broke Whige firm. What does
Speaker 1: it mean that they're falling from bankruptcy protection? So another
Speaker 1: thing that has happened in this Crypto winter has been bankruptcies, right,
Speaker 1: And what role have UM, Alameda, SPF, and FTX played
Speaker 1: in this and how are those roles somewhat interconnected at times? Well,
Speaker 1: Bakman Fried has been referred to as a bailout king
Speaker 1: cryptos JP Morgan. He's really stepped in and been the
Speaker 1: architect of various bailouts that have helped struggling platforms affected
Speaker 1: by crypto Winter. We spoke to him about the Voyager
Speaker 1: deal UM where they put in an emergency credit line
Speaker 1: to this struggling crypto lending platform. It ended up not
Speaker 1: being enough to help Voyager. The company did still file
Speaker 1: for bankruptcy and now they're you know, different companies, including
Speaker 1: f t X and Alameda in a joint venture, are
Speaker 1: bidding to buy Voyagers assets, and it's actually gotten pretty
Speaker 1: contentious between different parties, with Voyager calling Alameda and f
Speaker 1: t X is offer a low ball bid. So one
Speaker 1: of the things you mentioned was how there are differences
Speaker 1: between you know, crypto markets and traditional markets as usual.
Speaker 1: How are these firms regulated and how is it different
Speaker 1: from traditional finance. The crypto regulatory landscape is constantly changing.
Speaker 1: We still don't know which regulator is going to be
Speaker 1: primarily in charge of digital assets. The SEC and the
Speaker 1: CFTC have been vying for control over the industry. One
Speaker 1: thing that we do know is that more oversight is
Speaker 1: going to be put in place very soon. Again, as
Speaker 1: I mentioned, Bank and Freed has been active and testifying
Speaker 1: before Congress and advocating for the industry and asking for
Speaker 1: more regulatory clarity. I think it's possible that there will
Speaker 1: be rules and regulations put in place that helped prevent
Speaker 1: tight relationships between companies that do business with each other,
Speaker 1: and it remains to be seen whether that could potentially
Speaker 1: affect ALMITA and f t X. So Alameda is a
Speaker 1: prop trading firm, but they have also played a big
Speaker 1: role in venture investing. How does that work and how
Speaker 1: is that shifted? Right, because you had a big story
Speaker 1: recently about that too. Yeah, Alameda has been a big
Speaker 1: name in venture capital investing, supporting emerging startups like Anchorage Digital,
Speaker 1: which is a crypto bank, and Magic Eden, which is
Speaker 1: an n f T marketplace. Uh, they're big name investor,
Speaker 1: so it's really interesting when I spoke with Wilson who
Speaker 1: said that Alameda was actually shifting over much of its
Speaker 1: venture operations to ft X Ventures, and that's the venture
Speaker 1: arm of f t X, which launched earlier this year
Speaker 1: in January. And I confirmed that with the head of
Speaker 1: ft X Ventures, Amy Wou, who said that they were
Speaker 1: really taking on the startup investing from Alameda, that they
Speaker 1: had brought over one of Elamida's employees to help with that.
Speaker 1: And crypto venture capital is just a super fascinating space.
Speaker 1: A lot of investors are still very bullish on the
Speaker 1: crypto industry um, but it'll be interesting to see you
Speaker 1: know how startups do with uh this prolonged crypto winter.
Speaker 1: Thank you Hannah for joining me today. You can find
Speaker 1: more of Hannah Miller's reporting on the Bloomberg Terminal, on
Speaker 1: Bloomberg dot com and on Twitter. She's at h jeep Miller.
Speaker 1: I'm an Area Bloomberg Crypto senior editor in today for
Speaker 1: Stacy Murray Ishmael. On the next episode of Bloomberg Crypto,
Speaker 1: I'm Emily Nicole, crypto blogger for Bloomberg News, and tomorrow
Speaker 1: I'll be in the Stacey Murray Ishmael. Did you know
Speaker 1: that there's an entire conference dedicated to crypto skepticism? Stephen
Speaker 1: Deal is a software engineer by trade, a leading crypto
Speaker 1: skeptic and author, and now co founder of the recently
Speaker 1: established Center for Emerging Technology Policy. He'll join me to
Speaker 1: break down crypto's promises of a brighter tomorrow and where
Speaker 1: he thinks it might actually be closer to myth. This
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