Alameda Research may have already gone bankrupt in 2018
Years before the recent collapse, the trading house Alameda Research was reportedly bankrupt, before FTX saved it with customer funds.
Years before the recent collapse, the trading house Alameda Research may have gone bankrupt, before FTX saved it with customer funds.
Alameda Research probably faced bankruptcy as early as 2018. This appears in a new report in the Wall Street Journal. According to the report, the firm’s immature trading algorithm caused heavy losses in 2018. The company also lost up to two-thirds of its assets due to a poor bet on the XRP token. Additionally, some large institutions had previously refused to work with them because of opaque finances, according to the reports.
Alameda Research was therefore technically insolvent in early 2019. Only Sam Bankman-Fried’s efforts to lure new lenders with high returns could save the trading operation.
SEC investigations showed further that during FTX’s formation Alameda enjoyed a special status on the exchange. High-risk trades were funded with client money, guaranteed by backdoors in FTX’s code and the suspension of automatic liquidations.
The report thus concludes that founder Bankman-Fried could only drive the growth of the trading house thanks to customer money parked on FTX.
The SEC had been worked for years to crack down on the crypto world. After the FTX crash, they seem to be getting increasingly aggressive more aggressive.
