Alameda Research, Reef Finance Clash Offers Stark Crypto Warning

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Key Takeaways

  • Alameda has cut ties with Reef Finance while sister company FTX accused Reef of being a scam, tanking REEF token by 26%.
  • Reef Finance leaked documents revealing that Alameda had threatened to ruin the project by dumping tokens, delisting it, and discrediting it.
  • It appears that an $80 million business deal fell through due to a miscommunication handled entirely through Telegram with no formal legal contract.

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Days after “investing” $20 million in Reef Finance, Alameda Research refuted all ties with the DeFi project, leveling numerous accusations against it.

Reef Finance, however, reveals a wholly different take. So, what happened?

With screenshots and transcripts now available, the debacle ultimately reveals that $80 million deals are best brokered with legal contracts, not messaging apps.

FTX Denounces Reef as Rug Pull, Alameda Cuts Ties

On Mar. 15, the official Twitter account for FTX accused Reef Finance of being a scam, telling Reef Finance investors that their money was being stolen.

FTX did not respond to Crypto Briefing comment requests and has since deleted the tweet in question.

At around the same time, Alameda trader Sam Trabucco stated that Alameda had no connection to Reef Finance. He characterized the $20 million transaction as an OTC trade rather than a business investment, adding that Reef reneged on their deal and prematurely went to the media about it.

Brian Lee of Alameda’s Venture Capital department retweeted Trabucco’s post.

The claims from Alameda and FTX directly preceded a 26% drop in the price of REEF. Social media erupted with the news that Reef may be a scam and may have invented the story of an Alameda investment to pump its prices.

However, none of these claims offered the full story.

Crypto Briefing has obtained evidence that an investment announcement was carefully co-ordinated between both projects and released at the agreed time. Brian Lee himself greenlit the announcement, including the disclosure of a $20 million investment, on Mar. 10.

On Mar. 12, the announcement was made.

It appears that Alameda then sold some of their REEF, using the Binance exchange rather than their sister company, the FTX exchange.

An OTC Trade, Not an Investment

Alameda and FTX declined to comment, though Trabucco told Crypto Briefing that Alameda’s blog post on the matter constituted his comments.

In the post, Alameda released conversation transcripts of their own. On Mar. 8, it appears that Alameda brokered a deal for $80 million worth of tokens at a fixed price, settling the first tranche of $20 million.

They agreed to market this OTC trade as an investment in Reef Finance.

Source: Alameda Research

Reef wanted to reframe the trade as an investment for the public, saying, I assume it is fine with announcing you guys as a big investor, right?”

20% Token Discount Without Vesting

Speaking to Crypto Briefing, Reef Finance CEO Denko Mancheski stated that the token sell-off was unexpected, believing Alameda would lock up their new holdings until further notice.

Reef Finance sources claim that Alameda bought $20 million worth of tokens at a 20% discount and then tried to squeeze the project for more tokens at discounted prices.

“They said that they are investing long term and wanted to buy $80 million,” said Mancheski. “I sent them offers with vesting schedule but they said they are very reputable and long-term investors and professionals and have bought in even bigger projects even bigger amounts without lockups.”

Crypto Briefing has seen no evidence that Alameda agreed to lock up tokens, and Mancheski claimed to no longer have access to the conversation logs where aspects of the deal were discussed.

Mancheski stated that Alameda started selling their tokens on Binance “the moment we settled the $20 million,” further claiming that “they are lying that they still own the majority of the tokens.” It certainly appears that Alameda did indeed move tokens to Binance, although how many were sold is unclear.

Alameda transferred reef tokens to binance
Source: Etherscan

“The moment we realized we are getting basically scammed (instead of investing they are lying us and selling the tokens), we decided to stop,” said Mancheski.

This contradicts the quotes posted by Alameda, in which Reef agreed to sell $80 million and merely marketed the transaction as an investment for the public, fully aware that the deal was to broker an $80 million trade in multiple tranches.

Reef shared screenshots indicating that Alameda essentially threatened to ruin Reef Finance.

Threats included to publicly cut ties, dump their holdings and likely impact price, delisting REEF token, and even convincing other exchanges, including Binance, to delist REEF.

The legality of this last threat and of FTX accusing Reef Finance of being a “rug pull” stealing all investor holdings is unclear at this time.

alameda threatened reef finance

Alameda also told Reef that they had notified their legal department, threatening legal action “should this not settle.”

However, it’s difficult to say to what extent legal action can apply to a deal carried out in such a casual, ad-hoc way by both parties.

An $80 Million Business Agreement on Telegram

At the end of the day, while one could argue both sides are guilty of misrepresenting the truth and carrying out shady business practices, the deal fell apart due to a misunderstanding on both sides.

Alameda was supposed to buy $80 million worth of tokens at a discount, and Reef pulled out when Alameda started to sell earlier than expected.

The most noteworthy aspect of this story is that no formal legal agreement appears to have been written up for a deal worth $80 million.

According to Reef, the entire deal was brokered in good faith and through Telegram messenger, and Alameda representatives refused to comment on whether a legal document was in place.

Likely, the contract Alameda refers to in the Medium blog post was simply the written agreement in which Alameda asked Reef to “pls confirm” that an $80 million transaction was on the table. Sometimes written agreements hold up in court, and sometimes they don’t.

“There is literally nothing they can do legally since there was no paperwork,” Mancheski bluntly told Crypto Briefing.

In traditional finance, brokering a deal of this size with no formal legal contract would be unheard of.

In crypto, it’s business as usual.

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