FTX repeated mistakes of bankrupt Alameda Research crypto exchange
2023.01.02 11:18
FTX repeated mistakes of bankrupt Alameda Research crypto exchange
Budrigannews.com – Alameda Research, the now-bankrupt crypto trading firm, was close to going bankrupt in 2018, according to new reports on Sam Bankman-Fried and his collapsed exchanges. This occurred even before FTX came into the picture.
Alameda suffered significant losses as a result of its trading algorithm, according to a report that was published in The Wall Street Journal and cited former employees. The algorithm was created to execute numerous automated trades quickly. However, the company was losing money due to incorrect price prediction.
In 2018, Alameda lost almost 66% of its resources because of the value fall of the XRP (XRP) token and was in a squint of a breakdown. Notwithstanding, Bankman-Seared supposedly figured out how to safeguard the exchanging firm by raising assets from loan specialists and financial backers on a commitment of profits of up to 20% on their venture.
According to the report, SBF used Alameda’s sponsorship of the inaugural Binance Blockchain Week conference in January 2019 to connect with investors and obtain funding for his failing trading company.
With the promise to provide institutional investors with a safe haven, FTX went live in late April 2019. Bankman Fried used Alameda to help the FTX grow when it first launched because the trading company became the exchange’s primary market maker. It was always available for other traders to buy and sell from. According to those who are familiar with Alameda’s strategies, the exchange occasionally used the losing side of a deal to attract customers.
Despite Bankman Fried’s earlier assertion that Alameda and FTX have always operated independently, the Securities and Exchange Commission (SEC)’s recent lawsuit suggests otherwise.
According to the lawsuit, Bankman Fried gave instructions to make a piece of code in order to gain an unfair advantage. Alameda would be able to keep a negative balance on FTX thanks to the code, regardless of how much collateral it provided to the exchange. Also, Bankman-Fried made sure that Alameda’s FTX collateral wouldn’t be sold right away if its value fell below a certain threshold.
According to the most recent report, Alameda was always a sinking ship. However, Bankman Fried used the borrowed money to not only save it in 2018 but also to start the now-defunct FTX crypto exchange and help it grow.
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