The Alameda-fx crisis began years before the bankruptcy: WSJ report

The Alameda-fx crisis began years before the bankruptcy: WSJ report

The crypto winter 2022 in November was imploded as one of the largest and best-known crypto exchanges, FTX. The company, which had saved several crypto companies during the crash caused by Terra in May 2022, finally reported bankruptcy.

During the founder of FTX, Sam Bankman-Fried (SBF), and other managers are currently confronted with several complaints Because of fraud, new reports have appeared in which the crypto trade company Alameda Research connected with FTX was a changing war signal from the start.

a sinking ship from the beginning

according to a recently published Wall Street Journal Report In which several sources were cited with the matter, including former employees, the collapse of Alameda was long in coming before FTX came into the picture.

The report found that Alameda's first major trade was an arbizer game in Japan, where Bitcoin was sold at higher prices than in other regions. Alameda used this opportunity to make profits between $ 10 and $ 30 million shortly before the price gap closed in early 2018.

from arbitrage to bankruptcy

According to WSJ, Alameda suffered severe losses from his crypto trade algorithm despite the claim that he had made massive profits with his trade activities because he had wrongly guessed the price movements. The company had lost over two thirds of its assets by mid-2018, partly due to a severe decline in XRP prices.

SBF, however, collected funds from several lenders and investors to save the insolvent company and promised annual returns of up to 20 %. In April 2019, the former manager started the FTX crypto exchange, which was marketed as a safe port for institutional investors who are looking for an engagement in cryptocurrencies. Bankman-Fried then used Alameda to promote the growth of the stock exchange when the retail company became the primary market maker of FTX.

despite the claim that FTX and Alameda operated independently of each other, recent legal proceedings have shown that both companies worked together from the start.

ftx used Alameda to attract customers

Jeff Dorman, Chief Investment Officer at Arca, said: "The potential conflicts of interest and embedded risks are great if a digital-asset exchange also acts as the largest market."

according to people who are familiar with the company's strategy, Alameda occasionally went to the losing side of a trades to attract customers to FTX. The latest legal proceedings showed that Bankman-Fried also told his co-founder that he should create a code that would enable Alameda to keep a negative balance at FTX, regardless of how many collateral it has deposited with the stock exchange.

SBF also ensured that Alameda's collateral on FTX would not be sold automatically if their value fell under a certain level. This agreement thus provided Alameda an FTX credit line, which enabled the retail company to lend customer funds in the double -digit billion dollar height to continue his bad games.

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