Alameda Research, the now-defunct cryptocurrency trading business, was dangerously close to failing in 2018, far before FTX came into the scene, according to new investigations that investigate Sam Bankman-Fried and the exchanges that he caused to fail.
A study that was published in The Wall Street Journal and cited former workers stated that Alameda had significant financial losses as a result of the trading algorithm that it used. The program was developed to execute a high volume of transactions in a short amount of time in an automated fashion. Tthe company was losing money because of its incorrect predictions on how prices would fluctuate.
The decline in value of the XRP token in 2018 caused Alameda to lose approximately two-thirds of its assets, and the company came within a hair’s breadth of going out of business. Reports indicate that Bankman-Fried was successful in saving the trading company by soliciting financial support from lenders and investors and assuring them of profits of up to twenty percent on their investments.
Later in the month of April 2019, FTX was introduced with the intention of providing institutional investors with a secure refuge.
Bankman Fried leveraged Alameda as a growth engine with the introduction of the FTX, when the trading business became the primary market maker for the exchange. This allowed Bankman Fried to continue its expansion.
Some individuals who are knowledgeable with Alameda’s strategies assert that the exchange has on occasion taken the losing side of a bargain in order to attract customers.
In a previous statement, Bankman Fried said that Alameda and FTX have always functioned separately. However, a new complaint filed by the United States Securities and Exchange Commission (SEC) indicates that this is not the case. During the course of the case, it was discovered that Bankman Fried had given instructions to develop a piece of code in order to acquire an unfair advantage.
Regardless of the amount of collateral that Alameda put up with the exchange, the code would allow it for the company to keep a negative balance on the FTX. The Alameda has always been a ship that was doomed to sink from the very beginning.
However, Bankman Fried not only saved it in 2018 with borrowed money but also utilized it afterwards to construct the now-defunct FTX crypto exchange and fuel its expansion. In 2018, Bankman Fried rescued it with borrowed cash.