Sam Bankman-Fried offered lenders 20% returns in a scramble to rescue his crypto empire from an earlier crisis in 2018, report says
Sam Bankman-Fried promised big returns when seeking emergency cash in 2018, a report said.
Alameda Research was struggling due to a failing algorithm, per The Wall Street Journal.
The outlet said that Bankman-Fried's troubles long predated FTX and Alameda collapsing in 2022.
FTX cofounder Sam Bankman-Fried promised potential lenders returns of up to 20% as he sought to save his crypto empire from an earlier crisis in 2018, a report said.
The Wall Street Journal described problems at Alameda Research, the sister company to FTX, which it said stretched back years before its collapse in late 2022.
Citing anonymous sources, the outlet said Alameda was already struggling in 2018.
The crypto hedge fund needed rescuing after its algorithm for automated trading ran up losses on a series of inaccurate calls, The Journal said.
The issue, the report said, led Bankman-Fried to seek out additional loans to keep Alameda going.
Per The Journal, he promised annual returns as high as 20% in exchange for loans of cash or crypto, but offered few specifics.
Alameda continued operating past that crisis, and Bankman-Fried founded FTX in mid-2019.
Both spectacularly failed in late 2022 after losing billions, and legal action began against Bankman-Fried and others after accusations that FTX and Alameda had misused client funds.
Bankman-Fried is due in court on January 3 to answer federal charges linked to the collapse.
He is expected to made a plea deal after he was criminally charged on eight counts. They include fraud for allegedly using FTX funds to support the endeavors of Alameda, buy real estate, and fund 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 struck plea deals.
Former Alameda CEO Caroline Ellison pleaded guilty to seven counts, while FTX cofounder Gary Wang pleaded guilty to four. They are both now cooperating with prosecutors.
FTX filed for Chapter 11 bankruptcy protection on November 11 after it imploded, wiping out customer deposits worth billions. Bankman-Fried resigned as CEO the same day.
Representatives for Bankman-Fried didn't immediately respond to a request for comment by Insider, made outside normal working hours.
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