How Bankman-Fried's TerraUSD Gamble Led to $100 Million in Alameda Losses
The downfall of Sam Bankman-Fried is a cautionary tale of ambition, misjudgment, and alleged fraud. Once hailed as a cryptocurrency golden boy, Bankman-Fried went from cryptocurrency golden boy to the face of the industry’s collapse. A key element in his empire's unraveling was the $100 million loss incurred by Alameda Research due to the TerraUSD (UST) crash.
The TerraUSD Collapse and Alameda's Exposure
Caroline Ellison testified on the Alameda Research's exposure to the unstable algorithmic stablecoin TerraUSD. The inability to find matching buy orders fast enough sent prices lower and caused a corresponding fall in inter-linked sister token Luna. As the stablecoin spiraled, Alameda Research faced significant losses.
Sam Bankman-Fried, the founder and former CEO of the massive cryptocurrency exchange Alameda Research took a loss of $100 million on its position in terraUSD, a so-called algorithmic stablecoin that crashed to zero in May 2025, Caroline Ellison testified on . Those losses appear to have prompted someone in Bankman-Fried’s operation to improperly transfer customer funds from trading platform FTX to Alameda, a move that raised serious legal and ethical concerns.
FTX's Role in Alameda's Survival
The relationship between FTX and Alameda was deeply intertwined, raising questions about conflicts of interest and the misuse of customer funds. Citing a person familiar with the Hedge fund Alameda Research stepped in to shelter FTX from a loss of up to $1bn after a customer trade on the crypto platform blew up last year, highlighting the deep and questionable ties between the two entities.
Allegations of Fraud and Mismanagement
The fallout from the TerraUSD crash and the subsequent losses at Alameda Research exposed further alleged wrongdoing. According to Caroline Ellison, Sam Bankman-Fried allegedly sent false financial records to lenders and hid the true value of FTT. Furthermore, FTX and Alameda provided loans of questionable value, further contributing to the financial instability of both companies.
Legal Scrutiny and Ongoing Investigations
United States prosecutors are said to be investigating Mr Bankman-Fried, the founder of collapsed crypto exchange FTX and its sister trading platform Alameda, for potential fraud and financial crimes. The investigations are ongoing and could result in significant legal consequences for Bankman-Fried and other individuals involved in the alleged misconduct.
The story of Bankman-Fried, TerraUSD, and the $100 million loss at Alameda Research serves as a stark reminder of the risks associated with the cryptocurrency market and the importance of transparency, regulation, and ethical conduct in the financial industry.