Waves Founder, Sasha Ivanov Statement on Alameda Insolvency
This post was originally published on Waves
I am today making a statement to the Waves community to put to rest questions about the position held by Alameda Research on Vires Finance. As the creator of Vires Finance and an advisor to it’s decentralized community, I feel it is necessary to make this statement given the actions and wrongdoings of Alameda Research and my unfortunate role in this whole mess. This statement is to tell the users of affected by the insolvency of both FTX and Alameda, that I and the Waves ecosystem stands behind you. We intend to do what we can to help users have their funds returned.
Recent allegations have suggested that:
- Alameda Research was engaged in profiteering with FTX user funds and has subsequently filed for bankruptcy.
- There was a backdoor found in FTX accounts procedure that allowed a transfer of 10 billion in users’ assets directly to Alameda to go unnoticed.
- Between $453m — $659m of assets have left FTX user accounts in the last 24 hours ‘“under suspicious circumstances.”
Alameda Research currently has $90,359,718.855452 held in the USDN vesting contract on Vires Finance awaiting repayment. This puts the Vires Finance team in a peculiar position; these vested funds may actually be FTX user funds, and could help to repay those users affected by what is being called the worst collapse in crypto history. I have been clear for many months on the blatant market manipulation and anti-crypto actions of Alameda Research and related entities.
In April 2022, I released a statement on Twitter after investigating a case of market manipulation on the Waves blockchain. In an interview with Bloomberg, it was pointed out to me that FTX volume for Waves on February 28th had “gone from 0 to 135,242” (about $1.4m worth at that time). This spark began a 27-day run, pumping the token price ~480% from $11 — $64.
It appeared, at first, the growth of the token price was organic due to a culmination of long-term initiatives that had come together in the Waves ecosystem in Q1 2022:
- Waves protocol released its 2022 roadmap.
- DeFi users realized the opportunity to borrow tokens on Vires Finance like WAVES, USDN/USDT/USDC, BTC, and ETH and then sell them on Waves-based decentralized exchange Waves.Exchange or sending to other centralized exchanges like Binance and FTX — in effect, shorting the token but with lower risk of liquidation.
- DeFi users also realized they could supply USDT/USDC as collateral, borrow BTC, ETH, and WAVES, and then trade them on other chains as Waves connects through native gateways to other blockchains. In many cases, it was the cheapest place to do this due to fees on other Layer 1 blockchains.
- Vires also launched governance by Decentralized Autonomous Organization (DAO), so the VIRES token attracted users.
- Waves Labs launched in the US intending to grow the Waves Ecosystem to $10b in TVL and 5m DAUs.
I found that from March 20th, Alameda had been building a substantial position in WAVES tokens. $90million worth of stablecoin collateral was supplied for the equivalent in WAVES tokens and then sent to Binance or FTX. It remains my belief that Alameda took the WAVES loans to short WAVES on centralized exchanges. Effectively taking the opposite side on the trade that retail traders had gotten into, dumping into retail demand. This belief was confirmed by Alameda Research’s CEO Sam Trabucco, commenting on my post, suggesting they were short Waves (but only to collect the funding rates).
At the same time as this position was building, Waves had started to attract attention from armchair DeFi analysts who began to spread FUD and allegations that it was the Waves team pumping the value of Waves. This FUD campaign triggered a liquidity withdrawal from Vires Finance.
Unfortunately, the liquidity crisis this caused is still unresolved, with 1000s of Waves community members stuck in Vires Finance. For more than 8 months, the Vires Finance team has worked tirelessly alongside the community to find a solution that provides some resolution for those affected.
Several routes were taken by the Vires team, proposed and voted on by the community to resolve the crisis and make all users whole:
- First, slowly liquidating the unpaid debtors’ USDN collateral to the market for exchange into USDT/USDC and making repayments.
- As was outlined in the Waves DeFi revival plan
- The problems with which were discussed in the Markets reset discussion piece.
2. Second, adding a vesting option for large accounts to transfer their USDC/USDT deposits to a vesting contract and receive guaranteed repayment in USDN.
- As was outlined here for community discussion in the markets reset discussion piece.
- The problems with which were discussed in the Vires Full Reset discussion piece here.
3. Third, adding a vesting option for all accounts to transfer their USDC/USDT deposits into the vesting contract and receive guaranteed full repayment in USDN.
- As was outlined here for community discussion in the Vires full reset discussion piece
- However, due to price instability in USDN, Vesting was unilaterally paused to prevent the loss of user funds.
4. Forth, adding adaptive vesting based on USDN peg stability and staking all USDN in vesting to provide stuck users at least access to 7% APY on their funds.
- As was discussed in the Vires Finance Strategic Plan Update, here.
5. Fifth, my advisors and I approached Alameda as one of the largest accounts stuck to begin an open discussion on how to solve the crisis. Alameda refused to assist in any way.
From conversations with them, it’s clear that Alameda was not concerned about the funds stuck in Vires. However, with recent allegations now taken into account, it appears that Vires may have FTX users’ funds stuck in the platform.
All things considered, I want to reaffirm our ecosystem’s commitment to repay all users in full. This has been the goal from the very start of the crisis within the Waves ecosystem and will continue to be until it is achieved. Throughout this crisis, ViresDAO has relied on its community to make decisions, admittedly many of the proposed plans have not yet worked out as planned; for this, there are no excuses, but we are still here 8 months later firmly and publicly committed to this goal.
It is core to the values of decentralization to do what is right for the community of individuals. The terrible circumstances of 1000s of FTX users now unable to withdraw hits close to home. We have felt this pain distinctly for many months now; as a result, I will propose to block the vesting of the Alameda account until such a time as the incoming liquidators are in contact with us, and guarantees can be made that the USDN will go to repaying FTX users affected by this insolvency.
Only through supporting decentralized ecosystems will we have the chance to build a better financial system. It is clear after the collapse of Terra, Celsius, and now FTX and Alameda that centralization is the core driver of the greed making the crypto space a nesting ground for reckless and manipulative institutions to prey on retail traders. I can speak for the whole Waves ecosystem when I say we want no part in that story.
We will continue to push for doing right by ours and the crypto community as a whole. I see this as the ultimate culling of one of the worst actors in the space. Actors who have continued to proclaim they are supporting the space, only to covertly engineer total destruction of the movement towards a decentralized financial system. This is not the end, in fact this is a new beginning and I’m hopeful Waves can play it’s part in making it right.
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