A post by Coinbase’s director, Conor Grogan, has unveiled a particular series of activities by Alameda Research, led by Sam Bankman-Fried, who is now also associated with massive minting of over $39 billion USDT.
In the crypto world, the issuance and management of stablecoins, such as Tether (USDT), often go unnoticed among the millions and millions of daily exchange transactions.
However, a recent tweet by Coinbase’s director, Conor Grogan, has revealed a series of activities associated with Alameda Research, led by Sam Bankman-Fried, who appears to have minted over $39 billion USDT in 2021.
This substantial minting raises some fundamental questions about the backing of these tokens and what the impacts on the overall crypto market could be if unwanted imbalances and price slippages were triggered.
Onchain data shows that Alameda was responsible for minting $39.55B of USDT, a number that is 47% of Tether's circulating supply today
A previous report by Protoss estimated the number at around $36.7B; I was able to update these figures with additional wallets I found pic.twitter.com/fYBvGAYlFd
— Conor (@jconorgrogan) October 9, 2023
In the report, Coinbase’s director, Conor Grogan, highlights that the total amount of USDT issued by Alameda Research exceeded the value of the company’s total assets on its balance sheet during the cryptocurrency market boom in 2021. This suggests that Alameda may have issued USDT without real backing, raising concerns about the stability of these tokens.
ARBITRAGE AT NON-NOMINAL VALUE In ALameda Research
One of the key aspects of this story is the arbitrage that Alameda carried out after these massive USDT mintings. The details can be analyzed firsthand, as Sam Trabucco, the former co-CEO of Alameda, created a thread in 2021 explaining how the volatility in the value of USDT relative to exchange pairs provided them with arbitrage opportunities.
BTW, to connect some dots here — a lot of the people seeking access to a coin like USDT *aren't* doing so via creation. They're often doing so via just sorta buying it in the markets — and they're buying a LOT, and REALLY aggressively. https://t.co/pKRj3AMJ9D
— Sam Trabucco (@AlamedaTrabucco) January 11, 2021
It is said that Alameda was able to profit by selling USDT at a price higher than its nominal value of $1. This not only generated profits for the trading firm but also helped to keep the USDT price close to the $1 mark, which is essential for its function as a stablecoin.
Furthermore, Trabucco points out that other US dollar-based stablecoins, like USD Coin (USDC), had a less volatile premium due to their more transparent creation and redemption process. This implies that Alameda had a competitive advantage in USDT arbitrage, as they could create and redeem USDT as needed.
Another interesting aspect is that it is suggested that these USDT mints ordered by FTX were likely done with Alameda’s tokens, totaling 3.9 billion USDT. These activities are mentioned to have occurred mainly during the collapse of Terra’s algorithmic stablecoin.
Despite questions arising about the backing of the USDT issued by Alameda, Sam Bankman-Fried claimed in 2021 that his company had actively exchanged USDT for US dollars.
The report has generated enough interest for Tether to be contacted to confirm the amount of USDT that was minted at Alameda’s request.
This episode alerts us to the need for transparency. Behind both coins and firms and projects, there is the unchecked issuance of tokens that could have a significant impact on market stability.
The case of Alameda Research and everything related to FTX-SBF should always remind us of the importance of questioning every detail regarding the integrity and management of assets in the blockchain ecosystem.