Alameda Research, founded by Sam Bankman-Fried in 2017, was a prominent quantitative cryptocurrency trading firm known for its algorithmic strategies. At its peak, it traded between $1 billion and $10 billion worth of cryptocurrencies daily.
However, in the 2022 bear market, a long-standing fraud within Alameda came to light when it was revealed the firm owed FTX $10 billion. FTX had lent Alameda these funds using customer deposits.
When Binance CEO Changpeng Zhao discovered Alameda’s precarious financial situation, he swiftly sold off his exchange’s FTT holdings, triggering a run on FTX. This cascade led to a liquidity crisis, resulting in the bankruptcies of FTX, FTX US, Alameda, and associated entities. The aftermath of FTX’s collapse also impacted crypto lenders BlockFi and Genesis.
Authorities accused Sam Bankman-Fried and Caroline Ellison (co-CEO of Alamdea Research) of conspiring to embezzle billions from FTX customers. In December 2022, Ellison pleaded guilty to multiple charges.
As of October 31, 2023, Bankman-Fried is on trial in a federal court in New York City, facing seven federal charges, including wire fraud, securities fraud, and money laundering, which could lead to decades in prison. He has entered a plea of not guilty for all charges.