Sam Bankman-Fried Lost Half a Million Dollars Every Day After Alameda Launched, Michael Lewis Claims

The tides finally changed after Gary Wang and Nishad Singh (both FTX directors who have since pled guilty to fraud in the ongoing trial) joined the firm.

AccessTimeIconOct 4, 2023 at 8:21 a.m. UTC
Updated Oct 5, 2023 at 3:45 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Millions of dollars from the first-ever tranche of funds raised by Sam Bankman-Fried were almost lost after trading firm Alameda Research initially started in 2017, author Michael Lewis claimed in his biography of Bankman-Fried “Going Infinite.”

Bankman-Fried raised nearly $170 million from a set of investors ascribing to the ‘Effective Altruism’ community – a network of people who try to find the best ways to serve the community, usually by donating or funding causes.

The then 26-year-old SBF intended to invest these funds in the growing and inefficient crypto markets, capturing price differences across markets and creating high-frequency trading (HFT) strategies to pick up pennies every few seconds.

Most of these were losing bets from the start with Alameda losing millions of dollars in its first months. It lost over $500,000 every day throughout one such month, Lewis wrote, while some trading funds had “simply vanished” due to poor fund management.

Another bot called Modelbot, which was programmed to trade nearly 500 tokens on some thirty exchanges, turned out to be yet another dud initially. It made no distinction between deeply-liquid crypto majors such as bitcoin (BTC) and ether (ETH) and very thinly-traded memecoins – sparking concerns among early Alameda staff that it could end up evaporating all of the raised money.

The tides finally changed after Gary Wang and Nishad Singh (both FTX directors who have since pled guilty to fraud in the ongoing trial) joined the firm.

Wang is said to have coded a quantitative trading system that finally started to make Alameda money, while Singh put together the pieces to manage the company – putting it on track to what would eventually become the crypto exchange FTX.

Edited by Parikshit Mishra.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Shaurya Malwa

Shaurya is the Deputy Managing Editor for the Data & Tokens team, focusing on decentralized finance, markets, on-chain data, and governance across all major and minor blockchains.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Read more about