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FTX Liquidators Lost $74,000 in Bitcoin Wrapped in ‘Embarrassing Chain Misstep’ CryptoGlobe

The liquidators become the liquidated.

The restructuring team trying to locate and recover client funds amid the bankruptcy process of FTX and sister company Alameda Research is struggling to navigate the DeFi space.

The team recently attempted to transfer funds to a company owned by Alameda Research multi-signature wallet but in the process lost 4 Aave Wrapped BTC (aWBTC), worth around $72,000, according to a report by blockchain intelligence firm Arkham Intelligence.

“Liquidators would benefit from having a DeFi expert to advise on the mechanics of closing Alameda DeFi positions and recovering as much money as possible,” said Zachary Lerangis, chief operating officer at Arkham. Decrypt.

DeFi protocols, which allow users to trade, borrow, and lend crypto without intermediaries, require a certain level of sophistication to navigate. For example, the way loans work on Aave, borrowers post collateral and borrow against it. Aave requires loans to be over-collateralized, which means that the ratio of collateral to borrowed funds must remain above one. certain threshold or risk being liquidated. Once a loan has been repaid, the borrower can release their collateral.

But it seems the Alameda liquidators didn’t know that.

“Rather than repay the debt to close out the position, the liquidators chose to remove all additional collateral, putting the position at risk of liquidation,” Arkham’s team wrote in the report. “This resulted in the liquidation of approximately 4 WBTC, $72,000 at current prices.”

But that wasn’t the only “embarrassing misstep on the channel,” Arkham said. Among the team’s other blunders were nine failed attempts to move $1.75 million worth of Lido (LDO) tokens that were still vested. At the time of writing, wallet still has $3 million of LDO.

There are another wallet which Arkham says belongs to Alameda which sent $0.60 of DAI stablecoin and $0.02 of COLLAR token to the multi-sig, but still has $1.5 million of funds in the wallet which have not yet been moved.

Arkham says the wallets it has identified have at least $25 million in Alameda funds deployed in DeFi protocols, such as $6 million USDC, a Circle-issued stablecoin, used to collateralize a NEAR $2 million loan dollars on the Bastion protocol. There are also blocked funds on other channels. For example, an Alameda wallet displays a $300 balance on Etherscanbut still has $4.4 million worth of ETH on Aurora.

FTX, a once-dominant exchange, collapsed in November following a bank run on the exchange that forced the company to admit it did not hold individual pools of client assets, freeze withdrawals and , finally, to file for bankruptcy. Sam Bankman-Fried, founder of FTX and trading firm Alameda, has since been arrested and charged with eight financial crimes, including wire fraud and conspiracy to launder money. Authorities allege that funds from FTX clients were funneled to Alameda for its own trading and investments, resulting in the loss of billions of dollars.

The FTX Restructuring Team Made a Victory Lap in Court Yesterday to Have located 5 billion dollars value of assets. But early in the bankruptcy process, new FTX CEO John Ray III said the liquidators did not know how much money available to the company or how to access it.

There have also been suspicious transactions since FTX, including Alameda Research, entered Chapter 11 bankruptcy protection on November 11. In late December, blockchain sleuth ZachXBT spotted Alameda wallets. trade obscure tokens for Bitcoin and Ethereum through mixers, used to mask transactions.

“Alameda ETH addresses are digging through the couch for currency,” wrote a blockchain researcher on Twitter.

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