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.

According to people familiar with the matter and Alameda’s trading, the arbitrage opportunities quickly stopped and Alameda’s trading algorithm allegedly made a lot of bad bets. In the spring of 2018, Alameda took a huge hit betting on xrp (XRP) losing over two-thirds of Alameda’s assets. So SBF reportedly started to solicit loans again with pitches promising 20% returns, the people familiar with the matter explained.

Reports also show that Alameda’s former CEO Caroline Ellison had a significant negative balance on FTX in May 2022, months before the FTX fallout. Complaints from the indictment in Manhattan, the U.S. Securities and Exchange Commission (SEC) charges, and the lawsuit filed by the Commodity Futures Trading Commission (CFTC), indicate that Alameda’s losses were so large, it pushed SBF to allegedly borrow funds from FTX customers to bolster the company after the losses. The WSJ further notes that SBF contemplated shutting Alameda down months before the two companies collapsed but the idea never came to fruition.