SBF’s Alameda minted $38B USDT to profit off arbitrage trading: Coinbase director


Blockchain data flagged by Coinbase director Conor Grogan indicates that Alameda Research redeemed over $38 billion for Tether (USDT) tokens in 2021 despite not having the equivalent assets under management.

According to Grogan, the total value of USDT creation was higher than Alameda’s total assets on its books at the height of the wider cryptocurrency market bull run in 2021.

Grogan also suggests that FTX ordered USDT redemptions were likely to have been from Alameda’s tokens, totalling 3.9 billion USDT. The majority of this redemption amount was carried out during the collapse of the Terra Luna algorithmic stablecoin.

In Jan. 2021, former Alameda co-CEO Sam Trabucco weighed in on prevailing reports of significant USDT mints carried out by Tether and gave inside insights into how Alameda profited off arbitrage opportunities relating to the value of USDT to various trading pairs across different exchanges.

Trabucco described how the premium in which USDT trades to $1 was typically volatile given that Bitcoin to USDT trades resulted in a slight deficit in basis points when compared to BTC/US dollar trades.

“And note, *these* are the best markets to use to determine where USDT is trading — the combo of BTC/USDT and BTC/USD markets, e.g., are WAY more liquid than any exchange’s USDT/USD market, so the prices from these (even though it’s a two-leg trade) matter way more.”

Trabucco went on to explain that other US dollar stablecoins like USD Coin (USDC) had a less volatile premia due to the creation and redemption process involved for USDT. Given that select firms have the ability to create and redeem USDT, most market players acquire and trade USDT from markets themselves and not directly from Tether’s treasury:

“And when USDT gets above $1? A sophisticated firm like Alameda with great setups on all the exchanges and bots to execute more than one leg at a time is gonna want to sell! And we do — a LOT.”

Trabucco added that Alameda was able to “safely put on big bets” due to its ability to do USDT creations and redemptions when it needed to. The former Alameda CEO described the situation as a “win-win” situation for the trading firm and the stability of USDT’s dollar peg:

“Obviously we’re making money because we can, e.g., selling above where we create, but we’re also bringing the price in line so that when aggro buyers come in, it sticks close to $1.”

As a result, Alameda profited by collecting the premium on arbitrage opportunities through its ability to create USDT tokens. Bankman-Fried himself also chimed in on the debate in 2021, stating that Alameda actively redeemed USDT for US dollars.

Cointelegraph has reached out to Tether to confirm the amount of USDT tokens that had been minted at the request of Alameda.

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