Years Before Its Collapse, FTX/Alameda Faced Turbulence

1 min read

New research claims that Sam Bankman-Fried’s financial cryptocurrency empire was in trouble years before the FTX collapse.

According to the Wall Street Journal Bankman-Fried’s trading company Alameda Research helped SBF establish his reputation before launching FTX. However, Alameda’s success in investing was not as it appeared.

Alameda made their first major financial move in Japan with arbitrage. At the time, Bitcoin (BTC) was selling at higher prices than it could be purchased elsewhere. Alameda profited from this price gap.

According to the Wall Street Journal, Alameda made between $10 million- $30 million from the arbitrage play in 2018, before the price gap differential was closed. Profits were reduced by the complexity of the transactions, but it was short-lived.

According to the report, Alameda’s trading algorithm lost money by making incorrect predictions about price movements. Another financial loss was the XRP payments network.

Alameda had $30 million left after losing two-thirds of its assets in spring 2018. According to the report, Alameda made $1 billion in 2021 as crypto prices reached their highest levels.

Alameda invested $100m in a Kazakhstan Bitcoin mining business and $1billion in Genesis Digital Assets, which is a Bitcoin mining firm based in the United States.

Alameda spent only $10.5 million on startups in 2020. However, this number jumped to $1.4 billion in 2021.

The report states that Alameda was in a bind when 2022’s crypto crash caused lenders to request their money back. Now, Bankman-Fried is accused of using FTX customer funds in an illegal way to bail out Alameda. Alameda Research and FTX applied for bankruptcy protection in November 2022.

On January 3, 2018, the former crypto billionaire pleaded innocent to fraud and other criminal charges before U.S. District Judge Lewis Kaplan, Manhattan. The trial date has been set for October 2.

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Chris Munch

Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.

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