Alameda's trading algorithm, which is intended to carry out a high number of automatic and quick trades, reportedly generated losses as early as 2018 because to inaccurate predictions about price fluctuations, which cited people familiar with the situation.
Alameda's assets had decreased by more than two-thirds by the spring of 2018, to roughly $30 million, in part as a result of significant losses on XRP, the token for Ripple's payments network. The owner of Alameda, Sam Bankman-Fried, is constantly in need of money.
According to those with knowledge of the situation, he promised prospective lenders annual returns of up to 20% in cash or bitcoin in late 2018. Three Arrows Capital's Su Zhu tweeted that SBF has pledged proceeds to raise money for Alameda.
Alameda sponsored the inaugural Binance Blockchain Week conference in January 2019, and SBF took use of the opportunity to network with investors and secure funding for his struggling trading company.
Later in April 2019, FTX was launched to offer a safe haven for institutional investors. After the FTX became live, Bankman Fried used Alameda to promote its growth as the trading company turned into the exchange's main market maker. Other traders who wished to buy from or sell to them always had access to it. Those who are familiar with Alameda's marketing tactics claim that the exchange occasionally accepted the losing end of a deal to draw clients.
According to the most recent investigation, Alameda was doomed from the beginning. Bankman Fried later used it to build and promote the growth of the now-defunct FTX cryptocurrency exchange rather than merely saving it with borrowed money in 2018.
In contrast to Bankman Fried's earlier claim that Alameda and FTX have always functioned separately, the latest complaint by the United States Securities and Exchange Commission (SEC) makes the opposite claim.