An ex-Alameda Research employee has disclosed that the company's trading error caused an astounding 87% drop in the price of bitcoin (BTC) on the Binance US market. The source revealed that this accident caused losses in the "order of tens of millions."
'Fat Fingers' of an Alameda Trader Caused a Flash Crash on Binance US in 2021
Alameda Research, the crypto trading company run by Sam Bankman-Fried, has had a former employee open up about his time working there. On August 23, Aditya Baradwaj claimed that Bankman-Fried was responsible for his "entire life savings being stolen" when he was working as an engineer at Alameda. In the 18 months that Baradwaj spent at Alameda, his personal and professional destiny underwent a significant change.
On September 20, Baradwaj delved into an event that happened on October 21, 2021. On that day, the value of bitcoin (BTC) flash collapsed on Binance US by an astounding 87%, but it quickly recovered. He related how an Alameda employee made a mistake and accidentally placed an incorrect order, calling it a "slip of a finger."
According to Baradwaj, the trader tried to sell a block of BTC in response to news and placed the order using our manual trading system. They failed to notice that the decimal point was wrong by a couple of spaces. They sold BTC for pennies on the dollar as opposed to the going rate on the market.
Added Baradwaj:
The pace of the media also picked up. The company that was at the center of the flash crash, Binance US, issued a statement in which it claimed that one of its "institutional traders" had a "bug in their trading algorithm" and was to blame. I suppose Caroline had called a few people.
Alameda's CEO Caroline Ellison hasn't made a public faux pas before, either. A FTX insider revealed to Bitcoin.com News in December 2022 that Ellison's margin account had lost $1.3 billion in May 2022.
Sam Bankman-Fried discussed a specific margin position that grew unmanageably large in an interview with Jen Wieczner from New York Magazine. The margin for Alameda, he added, "was not going to be closable in a liquid way in order to make good on its obligations."
What do you make of the former employee's recollection of the problematic bitcoin trade? Post your ideas and viewpoints on this topic in the comments area below.