The Alameda agent failed the security certification process necessary to convert wrapped BTC into BTC, according to the CEO of Bitgo.
Alameda Research sought to redeem 3,000 Wrapped Bitcoins (wBTC) in the days preceding FTX’s bankruptcy declaration on November 11, according to Mike Belshe, CEO of digital asset custodian BitGo.
Belshe acknowledged that the company rejected the redemption request because the unidentified Alameda representative involved failed Bitgo’s security verification process and appeared unsure of how the wrapped-Bitcoin burning process worked during a December 14 Twitter Spaces hosted by decentralized finance (DeFi) researcher Chris Blec.
The methodology and [the security details] didn’t line up. Therefore, we held it up and firmly objected. The burn does not seem like this. And we must know who this individual was.
So, Belshe continued, “we held it, and while we were holding it, waiting for a response on those problems, [Alameda] went bankrupt, and of course, once they went bankrupt, everything halted.
The CEO of Bitgo also stated that Alameda’s 3,000 BTC mint request is still “stuck” on the platform’s dashboard and that the company will probably leave the tokens in their current location until the trustees handling Alameda’s bankruptcy case deal with them.
The request for a mint transaction from Alameda to exchange 3,000 wBTC for 3000 BTC was unsuccessful. wBTC Network Dashboard is the source.
The Ethereum transaction aggregator Etherscan also validated Alameda’s attempt to unwrap the 3,000 wBTC.
Redemption Of BTC:
While normally, this would have resulted in the redemption of BTC, Bitgo had a security measure in place before the conversion, which Alameda failed to implement.
It is unclear why the $50 million worth of wBTC was attempted to be redeemed. Still, it is known that FTX executives were working up until the very last minute to find money from several sources to avoid bankruptcy.
Five days before FTX US eventually filed for Chapter 11, analysis by Arkham Intelligence on November 25 revealed that Alameda had taken $204 million from eight separate addresses from the company.
When submitted to a burn address, which causes the release of BTC, wBTC—a tokenized form of BTC—can be redeemed for BTC. A 1:1 ratio is used for the conversion.
Holders of wrapped Bitcoin can now communicate with decentralized programs and smart contracts built on the Ethereum platform thanks to tokenization.
In 2019, Bitgo collaborated on developing wBTC with the multi-chain liquidity platform Kyber and Ren’s blockchain interoperability protocol. The decentralized autonomous organization wBTC DAO, which has more than 30 members, oversees wBTC.
According to the wBTC dashboard, BitGo presently has 202,255 BTC in its possession compared to the 199,238 wBTC in circulation, for an over-collateralization rate of 101.51%.