Sam Bankman-Fried’s Alameda Research troubles predate FTX: Report
New reports into Sam Bankman-Fried and his collapsed exchanges revealed that Alameda Research, the now-bankrupt crypto trading firm, almost collapsed in 2018, even before FTX was in the picture.
A report published in The Wall Street Journal citing former employees revealed that Alameda incurred heavy losses from its trading algorithm. The algorithm was designed to make a large number of automated and fast trades. However, the firm was losing money by guessing the wrong way about price movements.
In 2018, Alameda lost nearly two-thirds of its assets due to the price fall of the XRP token and was in a blink of a collapse. However, Bankman-Fried reportedly managed to rescue the trading firm by raising funds from lenders and investors on a promise of returns of up to 20% on their investment.
As per the report, In Jan. 2019, Alameda sponsored the inaugural Binance Blockchain Week conference, and SBF used the event to get in touch with investors to get funding for his failing trading firm.
Later in April 2019, FTX was launched with a promise to offer a safe haven for institutional investors. With the launch of the FTX, Bankman Fried used Alameda to fuel its growth as the trading company became the major market maker for the exchange. It was always open for other traders to purchase from and sell to. People familiar with Alameda's tactics claim that the exchange occasionally adopted the losing side of a deal to draw clients.
Related: US lawmakers under pressure following FTX collapse: Report
While Bankman Fried had claimed earlier that Alameda and FTX have always operated independently, the recent lawsuit by the United States Securities and Exchange Commission (SEC) suggests otherwise.
The lawsuit revealed that Bankman Fried
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