In a Manhattan federal court, Caroline Ellison, the former CEO of Alameda Research, resumed her testimony against Sam Bankman-Fried, CEO of FTX and owner of Alameda’s, FTX’s sister company. A complex web of personal and professional relationships intertwined, leading to financial deception that shook the cryptocurrency world.
Alameda’s Deceptive Finances Revealed
Bankman-Fried, both Ellison’s on-again-off-again boyfriend and boss, persistently directed her to manipulate Alameda’s financial records to deceive lenders. Ellison faced a perpetual state of anxiety, dreading the repercussions of her actions. Her testimony unveiled the intricate nature of cryptocurrency dealings.
Alameda’s Devastating Impact on Crypto Market
Around May 2022, as Alameda continued to borrow from FTX, the cryptocurrency market experienced a significant downturn, causing Alameda’s assets to plummet. In the midst of this crisis, Bankman-Fried demanded frequent updates on Alameda’s financial health. Despite the bleak outlook, he urged Ellison to employ FTX customers’ assets and other liquid funds to repay Alameda’s lenders.
Ellison, uneasy about utilizing customer assets for this purpose, expressed her moral concerns. The gravity of the decision weighed heavily on her, with billions of dollars at stake. Previous testimony from FTX executives centered on the $65 billion line of credit Alameda had at FTX, allowing the hedge fund unlimited access to FTX’s pockets.
A Desperate Balancing Act
The prosecution showed Telegram group chats that included Ellison, Bankman-Fried, other Alameda employees, and lenders about Alameda’s multi-billion-dollar loans. For Example, one lender Genesis, pressed Ellison to repay their loans and requested access to Alameda’s financial reports. In a startling revelation, Ellison confessed to forging some of these reports under Bankman-Fried’s direction. Government prosecutors presented one balance sheet with seven variations, all created to present an alternate, misleading picture to Genesis.
Ellison prepared an internal balance statement that she felt exposed how risky Alameda’s position was since it showed that the firm had borrowed $9.9 billion from FTX customers and given $4.6 billion in loans to top FTX executives. While this balance sheet had a positive net asset value – Alameda’s total assets were greater than all of its liabilities. Artificially inflating it was the inclusion of FTT tokens that could never be sold at the price they were marked as because selling Alameda’s total holding of FTT would significantly drop its price. Moreover, Ellison noted the balance sheet highlighted how much of Alameda’s assets were in illiquid investments.
Living in Fear
Ellison’s testimony exposed the constant fear she lived with—fear of the truth emerging and FTX customers withdrawing their assets in masses. Despite her apprehensions, Bankman-Fried continued to direct her to repay Alameda’s loans. Primarily by utilizing Alameda’s line of credit at FTX.
In her own words, “It was Sam’s decision.”
This testimony unravels a complex tale of financial deception in the cryptocurrency market, shaking the foundations of trust and integrity. The cryptocurrency community anxiously awaits the outcome of this trial, as it brings the truth behind these intricate dealings to light.
Bankman-Fried’s response in several separate messages said, “wow,” “uh,” “congrats?” “because shit’s exciting? “Ellison said, despite their difficult relationship, she shared her thoughts with Bankman-Fried.
“When the truth finally came out, I just felt a sense of relief. I just didn’t have to lie anymore, I wanted to be honest and take responsibility for what I had done.”
Caroline Ellison testified
In December 2022, Ellison met with the FBI after authorities searched her parents’ home where she was residing and confiscated her phone, computer, and journal.
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