Alameda being in balance sheet insolvency would depend on their assets taking enough of a hit to wipe out the equity buffer.

To Doug's point the junk tokens are likely at book value on their balance sheet

For financial institutions, particularly those with short-term liabilities, illiquidity is insolvency. The initial liquidity depresses prices which marks down the balance sheet.

If the assets in question are marketable securities (stocks and bonds), traded commodities, or real estate, then that's generally true. If the asset is some shitcoin for which no real market exists, not so much.

The linked article in turn links to coin desk which writes

>> Also, token values may be low. In a footnote, Alameda says “locked tokens conservatively treated at 50% of fair value marked to FTX/USD order book.”

That suggests to me the unlocked coins are on the balance sheet at market value and the locked at a 50% haircut.

In fact you could turn your argument around to critize the article too, as they are based on the assumption that some of the assets should marked to zero, rather than examining empirically whether those assets could be either collateral or be used to pay the debt.

- is actually financially illiterate

Checks out, sadly.

Market makers do not typically hold $B of anything.

Alameda does not need to borrow so much FTT to make markets.

If you can’t naked short, and if sales settle effectively immediately (cryptocurrency confirmation may well be slow, but you can’t usefully sell something and buy it back using the sale proceeds without confirming or at least generating and signing the transactions), then you need access to the actual token so you can sell it.

In contrast, one can make a market in EUR/USD without actually sitting on a big pile of EUR and USD. In fact, market makers are likely to target an average position of zero in every currency except their home currency unless they are also trying to make some sort of long term bet. Similarly, I doubt you’ll find that most market makers in, say, grain futures have warehouses full of grain. (Grain wants to be eaten, not hoarded for the life of a business. Also, making commodity markets is an entirely different business than growing, storing, transporting, and using commodities.)

(This is not trading or market advice, obviously.)

The only way this can happen is if the value of Alice's assets falls below the cost basis in which she purchased those assets (plus some relatively minor short-term secured interested rate). For a trading firm engaged in mark-to-market accounting that condition represents a loss in the income statement. This isn't strange voodoo, this is just simple accounting identities.

Alameda's cost basis on Solana is the seed round at approximately ten cents, and it's currently trading at $30. Similar story for all the Solana protocol tokens. I don't know what Alameda's cost basis is on FTT (if it's even holding a significant amount financed with hard currency), but we can almost certainly say it's close to the seed round price because the founder of Alameda is literally the founder of FTX.

To make this story make sense Alameda at one point must have bought some asset that has fallen significantly from its cost basis. What exactly is this supposed asset? Because Alameda certainly isn't known for going out and taken levered long exposure on BTC, ETH or other post-seed liquid tokens.

Solana is only worth $33 right now at the current spot rate, but at the volume that would need to be liquidated to pay off Alameda's debts, the price would crash to pennies because the amount would represent over half of the daily trading volume in Solana for the past month. (For comparison, in the stock market, selling the equivalent a single-digit % of the daily volume of a stock can tank the stock.)

Similarly, Alameda owns 80% of FTT, which has a 24h trading volume of less than 20% of Alameda's debts, and fewer than 250 active daily traders. It would be literally worthless if Alameda tried to liquidate enough to pay off its debts. And as the linked blog points out, FTT is just a shitcoin exchanged between two related entities on their accounting books, meaning that at least $5.8 billion of the value of FTT, i.e., 80% of the putative value, is purely made-up.

OTOH, as the Voyager debt was collateralized entirely with shitcoins, it's possible that the other $7+ billion in Alameda debt was also collateralized in shitcoins. If that's the case, than Alameda should be solvent because it appears they actually have about $100m in cash assets. But if not, they are legally insolvent.

> This has absolutely NOTHING to do with being insolvent.

This has everything to do with being insolvent.

If you don’t lose money somewhere - interests costing more than what you win being a loss for exemple - you should be able to pay back what you owe in the end.

You could be temporary insolvent because you have issues with payment delays and are strapped for cash but there are ways to deal with that especially at Alameda size.