BitGo CEO Mike Belshe confirms that Alameda Research attempted to exchange 3,000 Wrapped Bitcoin (wBTC) the day before Alameda Research’s bankruptcy. During a Dec. 14 Twitter Spaces hosted by DeFi researcher Chris Blec, Belshe confirmed that his company was holding back the transaction.
Why did they stop it?
BitGo withheld the transaction in question because the Alameda Research representative was unable to go through the verification. Furthermore, the Alameda Research employee did not seem to understand how the wrapped-Bitcoin burning process works. In principle, this is fairly simple. Wrapped Bitcoin is a so-called synthetic version of Bitcoin. To make them, you need to send Bitcoin to BitGo, who will then send you Wrapped Bitcoin back.
This will get you started in the DeFi world. When you are done with the Wrapped Bitcoin, you can send it back to BitGo and the real Bitcoin will come loose again. It is a way to use Bitcoin on Ethereum or other blockchains. The 3,000 Wrapped Bitcoin from Alameda Research are currently still at BitGo. They will keep them there until there is clarity from the bankruptcy procedure.
Alameda Research’s attempt to burn Wrapped Bitcoin to get normal Bitcoin in return has been confirmed on the Ethereum blockchain. Normally this would release the actual Bitcoin, but BitGo has a security mechanism that did not succeed in this case.
What was the motive?
It is not clear at this time why someone from Alameda Research attempted to cash in $50 million worth of Wrapped Bitcoin. One possibility is that FTX directors tried to get money from everywhere at the last minute before the bankruptcy. This would have been another $50 million that would have been lost had BitGo not stepped in.
A November 25 Arkham Intelligence analysis shows that Alameda Research collected more than $200 million from eight different addresses of FTX US before the bankruptcy. This happened about 5 days before they started the official procedure.
BitGo’s Wrapped Bitcoin project is no small undertaking, by the way. In total, the company now manages 202,255 Bitcoin for parties that need Wrapped Bitcoin. There are currently 199,235 Wrapped Bitcoin against that. This means that they are 101.51 percent backed by actual Bitcoin.