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.
