Report Shows Bankman-Fried Alameda Research Facing Financial Troubles in Early 2018 – Bitcoin News

Before FTX collapsed, Alameda Research was believed to be one of the best quantitative trading firms and market makers within the industry. Much of that perception may be a facade, however, as a recent report details Alameda’s financial woes in 2018. People familiar with the matter said Alameda lost money at the time and took a big loss from a botched xrp trade in the middle. – In 2018, the company’s assets decreased by more than two thirds.

Alameda Research’s Facade Crumbles As Top Quantitative Crypto Trading Firm Reveals Early Financial Struggles

According to a report published by the Wall Street Journal (WSJ), Sam Bankman-Fried (SBF) Alameda Research lost a large amount of money in 2018. Alameda Research was a quantitative trading firm that officially launched in September 2017 with Tara Mac Aulay. Before starting Alameda, SBF worked at Jane Street, where she traded international exchange-traded funds (ETFs) before becoming director of development at the Center for Effective Altruism.

The report shows the financial problems of Bankman-Fried's Alameda Study in early 2018
Sam Bankman-Fried.

Reports detail that when SBF started Alameda, the trading firm was making millions by trading through arbitrage. As an arbitrageur, SBF argued that opportunities come from countries such as Japan and South Korea, as bitcoin (BTC) is traded at high prices in these regions. Because of the so-called “Kimchi premium” price in South Korea, SBF said BTC is sometimes 30% higher and 10% higher in Japan. There have been a number of reports highlighting that Alameda has made millions from cryptocurrency arbitrage, but a recent Wall Street Journal report published on December 31, 2022 details that Alameda’s trade is not always profitable.

Although SBF resigned as Alameda’s chief executive, he still controlled much of the company until the end, the report said. WSJ reporter Vicky Ge Huang detailed that Alameda “took a big gamble, won some and lost a lot.” In addition, the WSJ report said that SBF continuously borrows money to finance such bets, and it promises investors double-digit returns if they help it. According to Austin Campbell, Citigroup’s former co-head of digital asset price trading, the firm wanted to partner with market makers like Alameda, but Campbell said he was skeptical of the SBF firm.

“What I immediately realized was that what was causing the heartburn was the complete lack of a risk management framework that they could articulate in any meaningful way,” Campbell said.

SBF’s Creditors’ Demands Raise Questions About Company’s Financial Stability

According to people familiar with the matter and Alameda’s trading, arbitrage opportunities quickly stalled and Alameda’s trading algorithm made many bad bets. In the spring of 2018, Alameda took a big hit on xrp (XRP), losing two-thirds of its assets. People familiar with the matter said SBF has started asking for loans again with schemes promising 20% ​​returns. A document reviewed by the WSJ shows that SBF’s attorney explained to one lender that Alameda was the best market maker in a specific area, but the attorney did not disclose any financial information.

Other people familiar with the matter said SBF is seeking lenders at the Binance Blockchain Week event in Singapore in January 2019. While Alameda sponsored the event for $150,000, it was alleged that the conference was used by SBF to solicit creditors and distribute a brochure to potential investors. The prospectus claimed that Alameda held $55 million in assets under management (AUM), but it remains to be seen whether that figure is factual. By February 2019, SBF decided to relocate Alameda from California to Hong Kong. Former partners said Alameda had made about $1 billion in profits during the cryptocurrency run in 2021, but when the bull run ended, SBF’s bets began to taper off.

Reports also show that former Alameda CEO Caroline Ellison had a significant negative balance in FTX in May 2022, months before FTX. An indictment in Manhattan, charges from the US Securities and Exchange Commission (SEC) and complaints from a lawsuit filed by the Commodity Futures Trading Commission (CFTC) show that Alameda’s losses were so great that it forced SBF to borrow from FTX clients. to strengthen the company after losses. The WSJ further notes that SBF considered closing Alameda months before the two companies collapsed, but the idea never came to fruition.

Tags in this story

2018, Alameda Research, Alameda losses, Arbitrage, assets under management, Binance Blockchain Week, Bitcoin, debt funds, Caroline Ellison, CEO, CitiGroup, crypto arbitrage, crypto bull run, Financial distress, ftx, FTXng, Hongment investor pitches , Jane Street , Japan , kimchi award , loans , Manhattan , Market Makers , profit , quant trading , quant trading firm , reporting , risk management framework , Singapore , South Korea , Tara Mac Aulay , Trading Algorithm , Wall Street Journal , XRP

What do you think of Alameda Research’s report that says bad bets are hurting in 2018? Let us know your thoughts on this topic in the comments section below.

Jamie Redman

Jamie Redman is Head of News at News and a fintech journalist based in Florida. Redman has been an active member of the cryptocurrency community since 2011. He is passionate about Bitcoin, open source code and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for News about disruptive protocols emerging today.

Image credits: Shutterstock, Pixabay, Wiki Commons

Refusal: This article is for informational purposes only. This is not a direct offer or an offer to buy or sell or a recommendation or endorsement of any products, services or companies. does not provide investment, tax, legal or accounting advice. Neither the company nor the author shall be liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use or use of any content, goods or services mentioned in this article. .

Source link