- Alameda Research employees were unaware of the impending collapse until the last moment, a former engineer has said
- The close connection between Alameda Research and FTX led to both firms’ downfall and criminal charges against Sam Bankman-Fried and Caroline Ellison
- Employees didn’t suspect any illegalities, despite several warning signs
Alameda Research employees were left in the dark until almost the day of its collapse, according to a former employee. Engineer Aditya Baradwaj told CoinDesk TV in a recent interview that it was “business as normal” in the days leading up to the implosion of FTX and Alameda, and that the internal warning signs were not enough to concern those within the hedge fund. Only when former CEO Caroline Ellison confessed did the reality of the situation hit home, which was followed by the implosion of FTX and, by extension, Alameda itself.
Staff Had “No Idea” Anything Was Untoward
Alameda Research was established by Sam Bankman-Fried, Caroline Ellison, and former FTX co-CEO Sam Trabucco, with the FTX trading arm attempting to maintain a degree of separation from its sister company. However, it was later revealed that the two entities were in fact very closely linked, with a substantial portion of Alameda’s balance sheet comprised of FTX’s FTT exchange token.
This revelation ultimately led to the downfall of both Alameda and FTX, culminating in criminal charges against Sam Bankman-Fried, who is currently on trial for fraud and conspiracy. But Baradwaj told Coindesk TV that nothing seemed amiss:
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. 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.
Baradwaj pointed out deficiencies in the firm’s internal security practices and risk management, citing a “fat finger” trade in 2021 that caused a temporary 87% drop in the price of Bitcoin. This incident occurred due to inadequate security and oversight, leading to a significant trade with a misplaced decimal point, resulting in Bitcoin being sold for a fraction of its value.
Ellison Pled Guilty to Multiple Charges
Baradwaj emphasized that Alameda’s lax security and risk management practices were particularly glaring when compared to traditional financial firms, which have stringent measures in place. While numerous issues were evident, the possibility of outright illegal activities within the company was never suspected.
Revelations over the use of Alameda by Bankman-Fried and the commingling of assets that went on surfaced when FTX was handed over to emergency CEO John Ray III, with Ellison pleading guilty to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering.
