Here’s How Alameda’s Liquidators Incurred $11.5M Loss in 2 Weeks

Alameda’s liquidators could have prevented $4 million of the losses, according to Arkham Intelligence. 

Liquidators of Sam Bankman-Fried’s bankrupt trading powerhouse Alameda Research reportedly incurred a significant loss of over $11 million since the start of the year due to multiple liquidations.

According to blockchain analytics platform Arkham Intelligence, Alameda lost $11.5 million in liquidations, with a single loss of $4.85 million and a preventable loss of over $4 million.

Over the past two weeks being under Liquidator control, the account incurred significant losses:
Largest single liquidation: $4.85M
Total liquidated amount: $11.5M
Preventable losses: $4M+
— Arkham (@ArkhamIntel) January 16, 2023

String of Liquidations
In a series of tweets on Monday, Arkham said Alameda incurred a massive loss on decentralized finance (DeFi) lending protocol AAVE after the company moved $7 million in USDC stablecoins and $4 million in DAI from the platform on December 29, 2022, to an Optimism L2 account.

The blockchain platform explained that the movement of assets began 30 hours after the liquidators started transferring funds out of Alameda’s wallet following an attack on its mainnet.

According to the tweets, the removal of assets from the active position of AAVE to Optimism placed the company’s position at a “dangerously close risk of liquidation.”

A Preventable Loss

The move eventually resulted in $11.4 million in USDC being sold off to liquidation bots on Optimism. At the same time, the AAVE treasury received $100,000 as liquidation tax, with the company losing more than $1 million on January 14, 2023.

Arkham further highlighted that the loss could have been prevented if the liquidators had used the call function on AAVE, which allows users to close their positions upon activation. The tool would have saved the company $15 million if applied instead of $11 million. This means about $4 million of the losses could have been prevented.

Betting Against Ether
With Alameda losing over a million due to the movement of assets between protocols, Arkham said the January 14 liquidation was the latest in a string of liquidations spanning almost two weeks of the account being handled by the liquidators. The latest resulted in $1.2 million worth of USDC liquidated for 731 ETH.

Arkham also disclosed that one of Alameda’s wallets ending in 0x997 maintained a 9,000 Ethereum (ETH) position and was worth around $10.8 million against the collateral of $20 million in USDC and $4 million in DAI with a net balance of $15.2 million before the liquidators gained access to the account earlier this month.

However, the same wallet now holds crypto assets with an estimated “$1.1 million short ETH against $1.4 million in USDC: net balance of 300k.”

When taken over by Liquidators as of 2 weeks ago, 0x997 maintained a short position of 9000 $ETH ($10.8M) against collateral of $20M USDC and $4M DAI: net balance of $15.2M.

Today, the account’s current value stands at $1.1M short Ether against $1.4M USDC: net balance of $300K. pic.twitter.com/k4WiEWfFlB
— Arkham (@ArkhamIntel) January 16, 2023