Trading firm Alameda Research was given outsized borrowing limits compared with other clients of FTX.
Alameda was able to access high levels of borrowing on FTX when Sam Bankman-Fried launched the crypto exchange, he said in an interview with the Financial Times published on Saturday.
He didn’t specify how large the limits were compared with other clients, but noted the possibility that they continued after FTX’s founding.
The origins of the large borrowing limits stemmed from Alameda’s role as a main provider of liquidity on FTX at its founding, before other financial groups showed interest, he said.
“If you scroll back to 2019 when FTX was first started, at that point Alameda was 45 per cent of volume or something on the platform,” Bankman-Fried said in the interview. “It was basically a situation where if Alameda’s account ran out of capacity to take on new positions that would lead to risk issues for the platform because we didn’t have enough liquidity providers. I think it had fairly large limits because of that.”
He noted that by 2022, Alameda accounted for only 2% of trading volume on FTX.
The discredited founder said that Alameda’s liabilities to FTX were about $10 billion at the time of its bankruptcy filings.
This is the latest in the series of admissions that he has made to the media since FTX filed for Chapter 11 bankruptcy protection last month.
On Wednesday, Bankman-Fried told the New York Times that he “messed up big” and took responsibility for the lack of oversight that led to Alameda Research’s risky positions with FTX. In an ABC News interview on Thursday, the former FTX CEO admitted that he didn’t spend any time on risk management.