- Lumida Wealth CEO analyzes FTX’s $10 billion loss.
- He explains Alameda’s role in FTX’s fraudulent allegations.
- His analysis delves deep and scrutinizes FTX’s technology choices.
In response to a recent video about the FTX fall, Ram Ahluwalia, CEO of Lumida Wealth, delves into what he believes to be the underlying reasons for the significant losses incurred by FTX, a prominent crypto exchange.
Specifically, Ahluwalia begins by addressing the staggering $10 billion in losses reported by FTX and questions the whereabouts of $2 billion in venture funds. He presents a hypothesis that FTX may have been involved in fraudulent activities, suggesting that this issue dates back to as early as 2021.
This has led Ahluwalia to draw a parallel between FTX’s situation and the infamous Bernie Madoff scandal. Adding on, Ahluwalia underscores the essential role played by Alameda, a crypto trading firm, in FTX’s operations.
Here, he explains that FTX is required to maintain a 1:1 inventory of customer funds, posing challenges in matching buy and sell orders in real-time. Thus, Alameda acts as the Designated Market Maker (DMM), ensuring liquidity under various market conditions, which is legally mandated in the U.S.
1/ How do we explain FTX's $10 Bn in losses? Where did the $2 Bn in venture funds go?
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My working hypothesis is that FTX was a fraud even prior to recent events and as far back as 2021.#SBF will go down in history as a fraud larger than Bernie Madoff. 🧵google news — Ram Ahluwalia CFA, Lumida (@ramahluwalia) December 5, 2022
The relationship between FTX and Alameda, which was initially mutually beneficial, starts to face challenges as competition in the crypto market increases. High-frequency trading (HFT) firms invest heavily in hardware and infrastructure, while FTX’s choice of technology and coding languages becomes a hindrance due to their slower execution speed.
As the crypto market experiences shifts and the bear market emerges, Alameda, acting as the DMM, faces difficulties in managing the decline in token values. He then explains how FTX allegedly creates an illegal backdoor. To do so, it provides Alameda with exemptions to margin and liquidation rules, potentially raising legal concerns related to self-dealing in securities law.
Ahluwalia’s analysis suggests a complex interplay of factors, including competition, technology choices, market conditions, and alleged misconduct that contributed to the challenges faced by FTX and Alameda. These revelations have sparked discussions in the crypto community about the underlying issues in the crypto industry.
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