- Sam Bankman-Fried promised big returns when seeking emergency cash in 2018, a report says.
- Alameda Research struggled because of a failing algorithm, according to The Wall Street Journal.
- The outlet said Bankman-Fried’s problems long predated FTX and Alameda’s 2022 collapse.
FTX co-founder Sam Bankman-Fried promised potential lenders returns of up to 20% as he tried to save his crypto empire from an earlier crisis in 2018, a report said.
The Wall Street Journal described problems at Alameda Research, FTX’s sister company, which it said stretched back years before it collapsed in late 2022.
Citing anonymous sources, the outlet said Alameda was already struggling in 2018.
The crypto hedge fund needed rescuing after its automated trading algorithm crashed with losses on a series of inaccurate calls, The Journal said.
The problem, the report said, led Bankman-Fried to seek additional loans to keep Alameda afloat.
Per The Journal, he promised annual returns as high as 20% in exchange for loans of cash or crypto, but offered few details.
Alameda continued to operate past this crisis, and Bankman-Fried founded FTX in mid-2019.
Both failed spectacularly in late 2022 after losing billions, and legal action began against Bankman-Fried and others following allegations that FTX and Alameda had misappropriated client funds.
Bankman-Fried is due in court Jan. 3 to answer federal charges related to the collapse.
He is expected to enter a plea deal after being charged with eight counts. They include fraud to allegedly use FTX funds to support Alameda’s endeavors, purchase real estate and finance millions of dollars in political contributions.
His victims were lenders and customers of FTX, according to prosecutors, who accuse him of securing the funds by deception.
His former associates have already taken plea deals.
Former Alameda CEO Caroline Ellison pleaded guilty to seven counts, while FTX co-founder Gary Wang pleaded guilty to four. They are now both cooperating with the prosecution.
FTX filed for Chapter 11 bankruptcy protection on Nov. 11 after it imploded, wiping out billions worth of customer deposits. Bankman-Fried resigned as CEO the same day.
Representatives for Bankman-Fried did not immediately respond to a request for comment from Insider, made outside normal business hours.