Crypto market maker Wintermute bears an eerie resemblance to Alameda

by Arthur · April 7, 2023

One of the biggest market makers in crypto, Wintermute claims to generate amazing revenues, trading trillions of dollars across thousands of trading pairs with differentiated strategies.

The media often characterizes its CEO, Evgeny Gaevoy, as a strange savant. 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 juggernaut, providing liquidity for 250 tokens across 50 trading platforms to “make digital asset markets liquid and efficient.”

Of course it is for profit. In 2021, the company’s trading volume topped $1.5 trillion, generating over $1 billion in corporate revenue with over 50% net profit margin. The firm revealed hundreds of millions of dollars in corporate revenue in 2022, too.

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Cryptos non-market making market participants

Like all so-called market makers in crypto, Wintermute has significant operations outside of actual market making. Actual, even the term “market-making” in crypto has become suspect after Alameda Research claimed to earn most of its money marketing. In fact, Alameda fraudulently took customers’ money from FTX.

The term market-making is misused in the crypto industry, with the term being used very generally to describe nebulous complicated trading activities. Acknowledging this, Wintermute even wrote a blog about the good, bad and ugly of crypto market making, mostly describing activities that aren’t market making at all.

Busy getting support from crypto journalists

Curiously, one of the non-market-making roles of Wintermute executives includes sitting on the board of media, The Block.

Gaevoy raised some eyebrows by joining The Block after its publication just now laid off 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:
-There is no investment involved from Wintermute or its affiliates (or me personally)
-There is no cash compensation involved (I, frankly, don’t need it, and Block can spend money better elsewhere)

— wish cynic (@EvgenyGaevoy) 31 March 2023

Wintermute CEO assures readers of The Block of his financial relationship with the publication

However, The Block could become a valuable tool for Wintermute. Gaevoy appeared on a March 29 episode of The Block’s podcast, The Scoop. A site-specific Google search for “Wintermute” returns 124 web pages hosted on the site.

The Block, readers will recall, once took significant funding from Sam Bankman-Fried’s Alameda Research.
Not only did Alameda’s money buy out all previous investors in The Block, but they also personally bought out their then CEO in the Bahamas.
Now that a number of FTX/Alameda executives have either pleaded guilty or are under state supervision, Wintermute may have a louder voice at The Block’s board meetings.
Of course, Wintermute still has financial ties to FTX. It had approximately $59 million worth of assets on FTX’s platform when it filed for bankruptcy in November 2022 and currently sits on an FTX creditors’ committee.

Take advantage of Terra LUNA when almost everyone lost everything

When Do Kwon’s Terra LUNA ecosystem lost tens of billions of dollars in May 2022, Wintermute somehow made tens of millions of dollars trading its stablecoin, Terra (UST).

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

A glowing cover story from Forbes magazine described Wintermute’s trade in one of the largest alleged pyramid schemes in modern history as its “trademark feature” whose “strategy is to experiment in many corners of digital assets.”

Read more: Will arrested Terra founder Do Kwon be extradited to US or South Korea?

Wintermute is a strange $160 million loss

Questions about the inner workings of Wintermute only pique curiosity.

The company reportedly lost $160 million in a hack in September 2022. It later said the hacker exploited an old wallet with administrator access to the vault contract.

However, some question whether the hack was a hack at all.

In fact, investigator 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 around the time of the $160 million hack. An analysis published on September 21, 2022 revealed a $92 million in loans to TrueFi, $75 million in USDC and WETH loans from Maple Finance, and $22 million in debt to ClearPool.

Since then, Wintermute has repaid the $92 million loan to TrueFi.

Edwards suspected that Wintermute used “ill-gotten” funds to repay the loan, despite claims to the contrary by security researcher BlockSec. Edwards mentioned that BlockSec had previously made mistakes, such as claiming that Wintermute used a vanity address to manage assets. BlockSec stands by its research.

Trade with Celsius customers’ funds

Wintermute probably didn’t help itself by acting as a market maker for the now-bankrupt Celsius Network. Bankruptcy proceedings revealed improper allocations of Celsius Network users’ assets, such as funneling funds to the now-defunct Terra-related Anchor Protocol. Celsius Network also sent $30 million in WETH to Maple Finance’s liquidity pools, exposing its assets to Wintermute.

Despite the losses associated with Celsius Network’s bankruptcy, Gaevoy maintains that Wintermute is not taking careless risks.

Celsius founder Alex Mashinsky faces fraud charges by New York state attorney general.

Allegations of brain drain in employees

A Twitter thread posted – and later deleted – by Stat Arb described how, according to Wintermute employees, most of the firm’s employees tend to leave within months of being hired.

During peaks in market volatility, Stat Arb claimed that Wintermute simply shuts down its 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 DEX aggregator incubated at Wintermute, completely flopped.