Before FTX collapsed it was assumed that Alameda Research was one of the top quantitative trading firms and market makers within the industry. However, much of that perception may have been a facade as a recent report details that Alameda suffered from financial troubles as early as 2018. People familiar with the matter said Alameda was losing money back then and a massive loss from a failed xrp trade in mid-2018 cut the company’s assets by more than two-thirds.
Alameda Research’s Façade as a Top Quantitative Crypto Trading Firm Crumbles with Reveal of Early Financial Struggles
Sam Bankman-Fried’s (SBF) Alameda Research reportedly lost large sums of money as early as 2018, according to a report published by the Wall Street Journal (WSJ). Alameda Research was a quantitive trading firm that was officially launched in Sept. 2017 with Tara Mac Aulay. Prior to launching Alameda, SBF worked for Jane Street and he traded international exchange-traded funds (ETFs) until he started his position as the director of development at the Centre for Effective Altruism.
Reports detail that when SBF started Alameda, the trading firm was making millions by via arbitrage. As an arbitrageur, SBF claimed that opportunities stemmed from countries like Japan and South Korea as bitcoin (BTC) was trading for a premium in those regions. Because of the so-called “Kimchi premium” in South Korea, SBF said BTC was 30% higher at times and in Japan, it was 10% higher. There’s a slew of reports that highlight Alameda making millions from crypto arbitrage, but a recent report from the Wall Street Journal published on Dec. 31, 2022, details Alameda’s trades were not always profitable.
The report says that while SBF stepped down as chief executive from Alameda, he was still very much in control of the company until the very end. The WSJ reporter Vicky Ge Huang detailed that Alameda “took big gambles, winning some and losing plenty.” Further, the WSJ report says SBF continuously borrowed money to bolster such bets and he promised investors double-digit returns if they helped him. According to Austin Campbell, Citigroup’s former co-head of digital assets rates trading, the firm was looking to partner with market makers like Alameda, but Campbell said he grew skeptical of SBF’s firm.
“The thing that I picked up on immediately that was causing us heartburn was the complete lack of a risk-management framework that they could articulate in any…
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