CFTC Lawsuit Documents Revealed: SBF Knew Early that Alameda's Assets Were Insufficient to Cover Debts, Considered Shutting Down in September

While the SEC is suing SBF for alleged fraud and violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, the CFTC has also brought fraud charges against SBF. In contrast to SBF's emphasis in various major interviews that he is not involved in the daily operations of Alameda Research, the legal document mentions that SBF not only has a deep understanding of Alameda's operations but also considered shutting down Alameda in September this year.

Alameda Research Enjoys Various Advantages

Similar statements were also made in the legal documents released after the restructuring of the team that took over FTX. The documents submitted by CFTC to the U.S. Southern District Court of New York placed heavy emphasis on Alameda's various advantages on FTX and the misappropriation of user funds.

1. Alameda Accounts Serve as User Deposit Entry Points

When FTX users deposit funds, Alameda manually categorizes the corresponding fiat currency into user accounts within FTX. FTX users will see the funds credited to their accounts, but in reality, the funds remain in Alameda's bank accounts.

In August 2020, FTX opened its own bank account, but users who had previously wired funds were not redirected and continued sporadically sending fiat to Alameda.

2. Unlimited Withdrawals by Alameda

Since its launch, Alameda has continuously used FTX user funds for operations, trading, lending, and other activities, with unlimited access to user deposits and assets.

3. Alameda's Trading Advantages

As a market maker on FTX, Alameda enjoys many privileges, including:

• No automatic liquidation

• Ability to trade without funds

• Faster front-running than all API users

Increased Leverage After May

Around May or June of this year, Alameda did not have enough liquid assets to repay loans or add margin under SBF's guidance, significantly increasing the proportion of user funds.

As a result, FTX's internal accounts show that Alameda's fiat liability to FTX is $8 billion, exceeding FTX's total revenue.

Alameda's Closure Planned for September

Previously, SBF repeatedly emphasized in interviews:

1. Never interfered with Alameda's affairs

2. Unaware of the significant shortfall in Alameda's funds

However, the CFTC documents indicate that in September, SBF considered closing Alameda and drafted a document titled "We came, we saw, we researched." At the beginning, SBF stated:

I only started considering this today, so I haven't done much review yet. But I think it might be time to shut down Alameda Research. To be honest, it should have been done a year ago.

He pointed out that the expected profitability of Alameda, past or future, is lower than FTX's hedging costs, and with funds scarce in the current bear market, there is no reason for Alameda to continue in this manner.

CFTC emphasizes that these statements contradict SBF's recent public statements regarding Alameda. CFTC also quoted SBF directly:

FTX's liquidity is insufficient, and given what Alameda is doing, we really can't shut it down yet.

SBF also drafted a tweet announcing the closure of Alameda:

I really don't know what's right! So I think my plan is to make a decision this coming weekend and implement it by next Monday. Any thoughts?