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Michael Lewis Alleges Sam Bankman-Fried's Daily Losses Reached Half a Million Dollars Post Alameda Launch

Oct 6, 2023 at 07:31 am

In his biography of Sam Bankman-Fried titled "Going Infinite," author Michael Lewis reveals a critical juncture in Bankman-Fried's journey. Initially, after the launch of the trading firm Alameda Research in 2017, millions of dollars from the initial funds raised were on the brink of being lost.

Bankman-Fried had successfully gathered close to $170 million from investors associated with the 'Effective Altruism' community, known for their commitment to finding the most impactful ways to serve the community, often through donations or funding various causes.

At the age of 26, SBF's plan was to deploy these funds into the burgeoning yet inefficient crypto markets. The strategy involved capitalizing on price disparities across markets and implementing high-frequency trading (HFT) techniques to gain small profits in a matter of seconds.

However, this venture was fraught with initial losses. Alameda suffered multimillion-dollar losses in its initial months, at one point averaging over $500,000 in losses daily. Lewis recounts instances where certain trading funds appeared to have simply vanished due to poor fund management.

The introduction of a bot named Modelbot, designed to trade nearly 500 tokens across around thirty exchanges, also met with initial disappointment. It lacked discernment between highly liquid cryptocurrencies like bitcoin (BTC) and ether (ETH) and thinly-traded memecoins. This raised concerns among early Alameda staff about the potential depletion of the raised capital.

The turning point came with the arrival of Gary Wang and Nishad Singh, both of whom later faced fraud charges in an ongoing trial related to FTX. Wang developed a quantitative trading system that ultimately started generating profits for Alameda, while Singh played a crucial role in orchestrating the company's operations—setting it on course to eventually become the prominent crypto exchange, FTX.

Read more: Visa's Crypto Innovations: Bridging Traditional and Digital

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