- Sam Bankman-Fried promised big returns when he hunted for emergency money in 2018, a report says.
- According to The Wall Street Journal, Alameda Research was struggling due to a buggy algorithm.
- The outlet said Bankman-Fried’s problems existed long before FTX and Alameda collapsed in 2022.
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FTX co-founder Sam Bankman-Fried promised potential lenders returns of up to 20% as he tried to salvage his crypto empire from a previous crisis in 2018, according to a report.
The Wall Street Journal detailed troubles at Alameda Research, FTX’s sister company, dating back years before the collapse in late 2022.
Citing anonymous sources, the outlet said Alameda had problems back in 2018.
The crypto hedge fund had to be bailed out after its automated trading algorithm suffered losses on a string of inaccurate calls, The Journal said.
The problem, the report said, prompted Bankman-Fried to take out additional loans to keep Alameda afloat.
According to The Journal, he promised annual returns of up to 20% in exchange for cash or crypto loans, but gave few specifics.
Alameda continued to operate after this crisis and Bankman-Fried founded FTX in mid-2019.
Both failed spectacularly in late 2022 after losing billions, and legal action was taken against Bankman-Fried and others after allegations FTX and Alameda misused client funds.
Bankman-Fried faces a court hearing Jan. 3 to answer federal charges related to the collapse.
He is expected to strike a plea deal after facing eight criminal charges. This includes fraud because FTX funds were allegedly used to support Alameda’s efforts to buy real estate and fund millions of dollars in political donations.
His victims were lenders and customers of FTX, according to prosecutors, who accuse him of securing the funds through deception.
His former employees have already closed pleas.
Former Alameda CEO Caroline Ellison pleaded guilty to seven counts, while FTX co-founder Gary Wang pleaded guilty to four counts. Both are now working with prosecutors.
FTX filed for Chapter 11 bankruptcy protection on Nov. 11 after it imploded and wiped out billions of dollars in customer deposits. Bankman-Fried resigned as CEO the same day.
Bankman-Fried officials did not immediately respond to Insider’s request for comment outside of normal business hours.