Bankman-Fried himself offered lenders 20% returns in a bid to save his crypto empire from an earlier crisis in 2018, the report said

FTX founder Sam Bankman-Fried leaves Manhattan Federal Court after his arraignment and bail hearing on December 22, 2022 in New York

FTX founder Sam Bankman-Fried leaves Manhattan Federal Court after his arraignment and bail hearing on December 22, 2022 in New York City.David Dee Delgado/Getty Images

  • Bankman-Fried himself promised big returns when he asked for emergency cash in 2018, the report said.

  • Alameda Research struggled because of a faulty algorithm, writes The Wall Street Journal.

  • The media said the Bankman-Fried issues long before the 2022 FTX and Alameda debacle.

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, that it said stretched back years before its collapse in late 2022.

Citing anonymous sources, the paper said Alameda was already struggling in 2018.

A crypto hedge fund needed a bailout after its automated trading algorithm made losses on a series of incorrect calls, The Journal reports.

The problem, the report said, prompted Bankman-Frieda to seek additional loans to keep Alameda operating.

According to The Journal, it promised annual returns as high as 20% in exchange for cash or cryptocurrency loans, but offered few details.

Alameda continued to operate after that crisis, and Bankman-Fried founded FTX in mid-2019.

Both collapsed spectacularly in late 2022 after losing billions, and legal action was launched against Bankman-Fried and others following allegations that FTX and Alameda misappropriated client funds.

Bankman-Fried is scheduled to appear in court on Jan. 3 to answer federal charges related to the collapse.

He is expected to plead guilty after being charged with eight counts of indictment. They include fraud for allegedly using FTX funds to support Alameda efforts, buy 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 fraud.

His former associates have already entered into plea agreements.

Former Alameda CEO Caroline Ellison pleaded guilty to seven counts, while FTX co-founder Gary Wang pleaded guilty to four. Both are now cooperating with prosecutors.

FTX filed for Chapter 11 bankruptcy protection on Nov. 11 after it imploded, wiping out billions in customer deposits. Bankman-Fried resigned as CEO on the same day.

Bankman-Fried representatives did not immediately respond to Insider’s request for comment outside normal business hours.

Read the original article on Business Insider

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