Crypto market maker Wintermute bears eery resemblance to Alameda

One of the biggest market makers in crypto, Wintermute, claims to generate incredible income, trading trillions dollars through thousands of trading pairs with differentiated strategies.

The media often characterizes its CEO, Evgeny Gaevoy, as a savant prodigy. Stories of his rise to fame bear eerie similarities to the once-fawning coverage of Sam Bankman-Fried's brilliance.

The London-based firm positions itself as a quantitative giant, providing liquidity for 250 tokens on 50 trading platforms to "make markets for digital assets liquid and efficient."

Of course, it is for profit. In 2021, the company's trading volume exceeded $1.5 trillion, generating over a billion dollars in corporate revenue with a net profit margin of over 50%. the signature revealed hundreds of millions of dollars in corporate revenue in 2022 as well.

Market Makers Who Don't Make Crypto Markets

Like all so-called market makers in crypto, Wintermute has considerable operations outside of actual market making. Indeed, even the term 'market maker' in crypto has become suspect after Alameda Research claimed to do most of its money market creation. In fact, Alameda fraudulently diverted money from FTX clients.

The term market making is abused in the crypto industry, and the phrase is used very loosely to describe nebulously complicated trading activities. Recognizing this, Wintermute even wrote a blog about the good, the bad, and the ugly of building crypto markets, mainly describing activities that are No market making at all.

Worried about gaining support from crypto journalists

Interestingly, one of the non-market-making roles of Wintermute executives includes serving on the board of directors of news outlet The Block.

Gaevoy increase some eyebrows on joining The Block after the post had just fired a third of its staff and hired a new CEO.

Wintermute's Gaevoy assured readers that Wintermute did not invest in or receive compensation from The Block.

Some important disclaimers:
-No investment involved from Wintermute or its affiliated entities (or me personally)
-No cash compensation involved (I, frankly, don't need it, and Block can better use the money elsewhere)

— cynical eager (@EvgenyGaevoy) March 31, 2023

Wintermute CEO Assures The Block Readers Of His Financial Relationships With The Publication

However, The Block could prove to be a valuable tool for Wintermute. Gaevoy appeared On a March 29 episode of The Block podcast, The premiere. A website-specific Google query for 'Wintermute' returns 124 web pages hosted on the site.

The Block, readers will remember, once took substantial Alameda Research funding from Sam Bankman-Fried.
Alameda's money not only bought out all of the previous investors in The Block, but also personally bought out his then-CEO of Bahamian real estate.
Now that several FTX/Alameda executives have pleaded guilty or are under government supervision, Wintermute may have a stronger voice at The Block's Board meetings.
Of course, Wintermute still has financial ties to FTX. He had approximately $59 million in assets on the FTX platform when he filed for bankruptcy in November 2022 and currently has a seat on FTX's creditors' committee.

Benefiting from Terra LUNA since almost everyone lost everything

Like Do Kwon's Terra LUNA ecosystem lost tens of billions of dollars In May 2022, Wintermute somehow made tens of millions of dollars trading his stablecoin, Terra (UST).

While profiting while millions of Terra LUNA users lost, Wintermute even took out UST loans approved by Do Kwon himself.

A brilliant Forbes magazine cover story described the Wintermute trade as one of the biggest alleged pyramid schemes in modern history as his "trademark move" whose “strategy is to experiment in many corners of digital assets.”

Wintermute's bizarre loss of $160 million

Questions about the inner workings of Wintermute only arouse curiosity.

supposedly the company lost $160 million for a hack in September 2022. He later said the hacker exploited an old wallet with admin access to his vault contract.

However, some people question whether the hack was a hack.

In fact, researcher James Edwards, writing under the pseudonym LibreHash, alleged that someone with inside knowledge of Wintermute stole those funds.

Wintermute was nearly $200 million in debt at the time of the $160 million hack. An analysis published on September 21, 2022, revealed a $92 million loan to TrueFi, $75 million in USDC and WETH loans from Maple Finance, and $22 million in debt to ClearPool.

Wintermute has since repaid TrueFi's $92 million loan.

Edwards suspected that Wintermute used "illicitly obtained" funds to repay the loan, despite security researcher BlockSec's claims to the contrary. Edwards mentioned that BlockSec had made mistakes before, such as claiming that Wintermute used a vanity address to manage assets. BlockSec supports his research.

Trade with Celsius client funds

Wintermute probably didn't help himself interim as a market maker for Celsius Network, now bankrupt. The bankruptcy proceedings revealed misallocations of Celsius Network user assets, such as the remittance of funds to the now-defunct Terra-related Anchor Protocol. Celsius network too sent $30 million in WETH for Maple Finance liquidity pools, exposing its assets to Wintermute.

Despite the losses associated with the bankruptcy of Celsius Network, Gaevoy claims Wintermute doesn't risk carelessly.

Celsius founder Alex Mashinsky faces fraud charges by the New York Attorney General.

Allegations of employee brain drain

A Twitter thread aware — and later removed — by Stat Arb detailed how, according to Wintermute staff, most of the company's employees tend to leave within months of being hired.

During spikes in market volatility, Stat Arb claimed that Wintermute simply shuts down their systems entirely because "nobody knows how half the code works" and "nobody knows how to trade it without losing money."

Stat Arb also claimed that Bebop, a Wintermute-incubated DEX aggregator, utterly failed.