Here's what Alameda Research's balance sheet looked like in 2021 and 2022, according to Sam Bankman-Fried

• On November 2, a Coindesk report on Alameda Research's balance sheet helped spark the fall of FTX. 
• On Thursday, Sam Bankman-Fried published his version of what the balance sheet looked like in 2021 and 2022. 
• "Alameda failed to sufficiently hedge against the risk of an extreme market crash" he wrote.

Sam Bankman-Fried in a Thursday Substack post published his estimations of what Alameda's balance sheets looked like in 2021 and 2022, attempting to defend the reputation of him and his firm against claims that a wild lack of oversight led to the insolvency of his crypto empire. 

The collapse of Bankman-Fried's FTX exchange and the downfall of the once lionized executive all started with a November 2 report published by CoinDesk that revealed curious details about Alameda Research's balance sheet. 

One particularly troubling detail was that SBF's trading firm held $14.6 billion of assets, with much of it in the form of the FTT token, the native crypto created by FTX. 

However, in his Substack post, he estimated that in 2021 Alameda's net asset value skyrocketed to roughly $100 billion by the end of the year, and he said that figure is still around $50 billion if you ignore some of the more diluted assets.

He noted that over the course of 2021, Alameda had roughly $8 billion in net borrowing, which was approximately divided up as follows: $1 billion on interest payments to lenders, $3 billion to buy out Binance's stake in FTX, and $4 billion in venture investments. 

"By 'net borrowing', I mean, basically, borrowing minus liquid assets on hand that could be used to return the loans," he explained. "This net borrowing in 2021 came primarily from third party borrow-lending desks–Genesis, Celsius, Voyager, etc., rather than from margin trading on FTX."

Here is a screenshot of Bankman-Fried's estimation of the balance sheet in 2021: 

In his words: "In that context, the ~$8b illiquid position (with tens of billions of dollars of available credit/margin from third party lenders) seemed reasonable and not very risky.  I think that Alameda's SOL alone was enough to cover the net borrowing.  And it was coming from third party borrow-lending desks, who were all–I was told–sent accurate balance sheets from Alameda."

He adds that before 2022, it would have taken roughly a 94% market crash to pull Alameda underwater, as the firm was at that point "massively overcollateralized."

While its solana position alone was larger than the amount of leverage it had at the time, according to Bankman-Fried, the company still failed to "sufficiently hedge" against the risk of an extreme crash, and was long on the market. 

At the start of 2022, Bankman-Fried estimated that Alameda's balance sheet looked like this: 

Over 2022, the market crashed over and over again, he explained, with major tokens like bitcoin, ether, solana and others all shedding value. That year brought turmoil for crypto firms like Three Arrows Capital and Voyager, which dragged everything down with them. 

All the while, liquidity dried up, which meant Alameda's tens of billions of dollars in liquid assets had dwindled in value to somewhere in the low billions by fall 2022. 

"Alameda's assets–a combination of altcoins, crypto companies, public equities, and venture investments–fell around 80% over the course of the year," Bankman-Fried wrote, "raising its leverage bit by bit."