Alameda Research, the quantitative trading firm, co-founded in September 2017 by Sam Bankman-Fried, reportedly had a “secret exemption” from the crypto exchanges liquidation procedures according to bankruptcy filings. 

One of the largest crypto investment firms, Multicoin Capital, told investors in a letter on Thursday that FTX’s collapse and the resulting market decline has caused the fund to be down by 55% this month. Multicoin added that it expects the market to get worse before a rebound begins.

According to The Block, a Binance spokesperson has told them that authorities are asking them questions over the collapse of FTX.

Top stories in the Crypto Roundup today:

• Alameda Had ‘Secret Exemption’ from FTX Liquidation Procedures 
• Multicoin Capital Expects FTX Contagion to Wipe Out Many Firms
• Binance Says it Cannot Provide FTX Details Because of Talks With Regulator

Alameda Had ‘Secret Exemption’ From FTX Liquidation Procedures

Alameda Research, the quantitative trading firm, co-founded in September 2017 by Sam Bankman-Fried, reportedly had a “secret exemption” from the crypto exchanges liquidation procedures according to bankruptcy filings. 

The new CEO of FTX, John J. Ray III, cited “the secret exemption of Alameda from certain aspects of FTX.com’s auto-liquidation protocol” among a number of other shortfalls related to security and financial controls that have been uncovered since he got control of the company on Nov. 11, just before it filed for bankruptcy in a U.S. court.

If true, the revelation would indicate that Alameda had a direct advantage when trading on FTX. Unlike some traditional exchanges, crypto exchanges, such as FTX, automatically sell the collateral of derivatives traders once a “liquidation price” is met.

Ray also mentioned practices such as registering homes purchased using company funds under employees’ names and managers approving disbursements by posting emojis on an internal chat platform.

Multicoin Capital Says FTX Contagion Will Wipe Out Many Trading Firms in Coming Weeks

One of the largest crypto investment firms, Multicoin Capital, told investors in a letter on Thursday that FTX’s collapse and the resulting market decline has caused the fund to be down by 55% this month. Multicoin added that it expects the market to get worse before a rebound begins.

“We expect to see contagion fallout from FTX/Alameda over the next few weeks,” the letter said. “Many trading firms will be wiped out and shut down, which will put pressure on liquidity and volume throughout the crypto ecosystem. We have seen several announcements already on this front, but expect to see more.”

Multicoin Capital currently has assets stranded on FTX whilst the bankruptcy proceedings are going on. In a letter sent out last week, the firm said it was able to retrieve roughly 25% of its assets that were held on FTX; however, the inaccessible money that is still on FTX represents around 15.6% of the fund’s total assets. 

Multicoin has since stated that 100% of its assets “outside of the capital stuck on FTX” is on Coinbase or in self-custody wallets. “At present, the fund has no assets exposed to any other counterparties,” Multicoin said. “In the future, we anticipate some diversification of custodial exposure – with Coinbase expected to remain our primary custodian – and will resume trading with other counterparties as we continue to assess the present market fallout.”

Binance Says It Cannot Provide FTX Details Because of Confidential Talks With Regulators

According to The Block, a Binance spokesperson has told them that authorities are asking them questions over the collapse of FTX. 

The largest crypto exchange by trading volume has gotten criticism from UK MPs over not providing sufficient information to a parliamentary committee. The Binance spokesperson said that further details could not have been provided since the exchange is cooperating with several regulatory authorities:

“As explained to the Treasury Select Committee, we are unable to share any documentation in relation to FTX beyond the factual information we provided because the matter is subject to ongoing inquiries by regulatory authorities in a number of jurisdictions, with whom we are cooperating and sharing information on a strictly confidential basis.”

A committee in the U.S. House of Representatives also wants to know more about Binance's role in FTX's collapse. Binance, FTX, and Alameda Research are all on the list of firms that  the committee wants to hear from in next month’s hearing.

CryptoCompare Exchange Review: Spot Volumes Plummet To Lowest Level Since 2020

The crypto markets rebounded in October after two consecutive months of decline, with Bitcoin and Ethereum rising 5.49% and 18.4% respectively. However, this failed to translate into increased trading activity as spot and derivatives trading volume on centralised exchanges recorded new lows in October.

More recently, it has been an unprecedented couple of weeks in the crypto industry, with investors still reeling from the aftermath of FTX’s insolvency. The collapse of FTX is set to have ripple effects on market participants, including other centralised exchanges. The weekly Bitcoin net flows from centralised exchanges recorded their largest ever outflow, with 97,805 BTC moving off exchanges in the 7-day period ending on November 13.

In October, spot trading volume on centralised exchanges fell 25.4% to $929bn, recording the lowest monthly traded volume since October 2020. This coincided with the 30-day volatility of Bitcoin and Ethereum, which hit their lowest levels since 2020 at 26.6% and 31.9%.

State of the Crypto by Top Tier Exchange Volume

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