Sam Bankman-Fried offered lenders 20% return in a race to save his crypto empire from an earlier crisis in 2018, report says

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FTX founder Sam Bankman-Fried leaves Manhattan federal court following his arraignment and bail hearings on December 22, 2022 in New York City. David Dee Delgado/Getty Images

Sam Bankman-Fried promised big returns when seeking emergency money in 2018, according to a report.

Alameda Research was in trouble due to a faulty algorithm, according to the Wall Street Journal.

The outlet said Bankman-Fried’s troubles predated the collapse of FTX and Alameda in 2022.

FTX co-founder Sam Bankman-Fried promised potential lenders returns of up to 20% as he sought to rescue his crypto empire from an earlier crisis in 2018, according to a report.

The Wall Street Journal has described problems at Alameda Research, FTX’s sister company, which it says date back to years before its collapse in late 2022.

Citing unnamed sources, the outlet said Alameda was already struggling in 2018.

The crypto hedge fund needed rescue after its auto trading algorithm suffered losses on a series of inaccurate calls, the Journal said.

The problem, according to the report, led Bankman-Fried to seek additional loans to keep Alameda in business.

According to The Journal, he promised annual returns of up to 20% in exchange for cash or crypto loans, but offered few details.

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

Both failed spectacularly in late 2022 after losing billions, and a lawsuit has been filed against Bankman-Fried and others after accusations that FTX and Alameda misused client funds.

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

He is expected to enter a plea deal after being criminally charged on eight counts. They include fraud for allegedly using FTX funds to support Alameda efforts, purchase real estate, and fund millions of dollars in political contributions.

His victims were lenders and clients of FTX, according to prosecutors, who accuse him of obtaining the funds by deception.

His former associates have already reached plea deals.

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

The story continues

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

Representatives for Bankman-Fried did not immediately respond to a request for comment from Insider, made outside of normal working hours.

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