Why Alameda Bankruptcy May Be Certain After Binance FTX Deal
The Binance FTX buyout deal is set to go through. Binance founder and CEO Changpeng “CZ” Zhou confirmed that the company will fully acquire FTX.com. FTX founder Sam Bankman-Fried has confirmed the deal as well. However, some experts believe that the Binance FTX deal can result in almost certain insolvency for Alameda.
Why Is Binance Acquiring FTX
Binance CEO CZ tweeted that the company will sell all of its FTX tokens FTT holdings. Reports highlighted that Sam Bankman-Fried’s trading company Alameda Research has significant exposure to FTT tokens. As of June 30th, out of the $14 billion worth of assets held by Alameda, more than $3.5 billion was unlocked FTT tokens. Sam Bankman-Fried is also the founder of the crypto exchange FTX.
The close relationship between FTX and Alameda resulted in a massive sell-off of the FTT token. Alameda CEO Caroline Ellison tried to calm down the volatility in the market. She also offered to buy Binance’s FTT holdings at $22. However, experts soon suggested that this offer was because Alameda has hedged FTT at $22. Fears of insolvency for both FTX and Alameda began to swirl in the crypto community.
CZ revealed that Sam Bankman-Fried and FTX asked for help from Binance. He also revealed that FTX is dealing with a severe liquidity crunch. Therefore, Binance will fully acquire FTX, one of its biggest competitors. SBF also confirmed the transaction.
Why Alameda Can Become Insolvent
Experts highlight the fact that FTX asking for help from Binance mean that FTX has a giant hole in its balance sheet. Other large investors could not help FTX fill that hole. However, Binance is only acquiring FTX. Therefore, Alameda’s liability to FTX remains.
FTX token FTT has fallen by 73% in the last 24 hours. This will likely exacerbate the stress on Alameda’s balance sheet. Experts believe that Binance will extract all the outstanding liability from Alameda. This will result in a potential Alameda insolvency.
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