- Caroline Ellison, SBF’s ex-girlfriend and former CEO of Alameda Research, testified in court recently.
- Ellison said that Bankman-Fried instructed her and her colleagues to transfer billions of dollars in customer funds from FTX to Alameda accounts.
- SBF also asked Ellison to fabricate spreadsheets showing various scenarios that would impact Alameda’s ability to continue taking out loans.
- Ellison said that Bankman-Fried told her that the auditors wouldn’t look at the fabricated figures.
- Ellison also testified that FTX had lent millions of dollars to its executives, including SBF.
Nowadays, it seems that new details of the FTX scandal from November 2022 keep popping up all over the place.
Quite recently, FTX former CTO, Gary Wang testified that the exchange’s insurance fund (put in place to protect traders and investors) was one huge lie and that it was falsified using a random number generator.
In recent news, Caroline Ellison, Bankman-Fried’s ex-girlfriend and former CEO of Alameda Research has come out with some damning revelations that may put SBF behind bars for a very long time.
“SBF Made Me Do It”
According to a recent testimony from Ellison in a recent courtroom hearing, SBF was the key orchestrator of the entire fraud scheme at the collapsed exchange.
Ellison says that Bankman-Fried was the mastermind of the whole operation that involved using FTX customer funds for Alameda’s purposes.
Ellison, on the stand, said that “Alameda took several billions of dollars from FTX customers and used it for investments.”
Ellison’s testimony was live-streamed from the courtroom by Matthew Russell Lee, a journalist from the Inner City Press, who reported on the details of the alleged fraud. Ellison said that she and her colleagues at Alameda research were instructed by SBF, who asked them to transfer billions in customer funds from FTX to Alameda accounts and use them for the crypto hedge fund’s activities.
How It All Started
Ellison, according to her testimony, said that she met Bankman-Fried at a New York trading firm called Jane Street Capital, where she worked as a quantitative trader. She says that she joined Alameda in 2018 after Bankman-Fried co-founded it as a hedge fund firm that specialized in quantitative crypto trading.
Before long, he assigned her as co-CEO in 2021 and sole CEO in 2022 with a salary of $200,000 per year and two bonuses of $20 million and $100,000.
Ellison said she didn’t feel particularly qualified for the CEO position but Bankman-Fried said it made sense and there wasn’t anyone better for the job.
Ellison testified that she and SBF used to have regular conversations about Alameda and FTX.
During these conversations, he mentioned that it was a “big priority” for Alameda’s borrowing capabilities to increase so that the company could make more trades, investments, and acquisitions.
In other words, “SBF was directing us to borrow as much money as we could,” Ellison said.
FTX’s Borrowing Spree – “The Auditors Won’t Look At That”
Ellison testified that in the beginning, Alameda would take loans from third-party lenders for trading purposes.
And by 2021 (a year before Alameda and FTX collapsed), the debt was a whopping $10 billion -15 billion. This was a problem because those loans were open-term loans that could be recalled at any time.
To counter this, Ellison says that she was asked by Bankman-Fried to fabricate spreadsheets showing various scenarios that would impact Alameda’s ability to continue taking out loans, as well as repay them.
Ellison said SBF told her at one point that FTX funds would be a “good source of capital” for Alameda.
Before long, Alameda began to tap FTX’s fiat currency deposits so that the former could use these funds to make investments and execute arbitrage trades on various cryptocurrencies.
Ellison testified she first raised concerns about using FTX customer funds during an audit of FTX.
“No don’t worry. The auditors aren’t going to look at that,” she said Bankman-Fried told her.
I Didn’t Feel Good About It, Ellison Says
Ellison said that FTX had also lent millions of dollars to its executives, including Bankman-Fried (some of which she signed on behalf of Alameda).
The purpose of the loans, she said, was so Alameda could invest in a gambling startup and so political donations could be made.
Ellison said that she had always been concerned about the illiquid nature of Alameda’s long-term investments. The debt was also worrying, considering Alameda’s inability to pay the open-term loans if they were called.
“I didn’t feel good about it,” Ellison said.
In the third quarter of 2021, Ellison began sharing analyses for worst-case and bad-case scenarios if Alameda’s loans needed to be repaid. This included selling some of its crypto holdings, raising more capital and adding more loans — all of which, by the way, showed significant risk for Alameda.
She was asked Tuesday while testifying how she would repay the loans if they were called.
“I assumed we would use customer funds.”
I’m Not Guilty, Bankman-Fried Says
Bankman-Fried has pleaded not guilty to all charges. In fact, his lawyers have claimed that he didn’t steal money from FTX because he believed that Alameda could use funds on deposit with his cryptocurrency exchange.
Bankman-Fried’s lawyer argued that he was a visionary entrepreneur who created FTX and Alameda to revolutionize the crypto industry.
SBF’s lawyer has also said that Bankman-Fried had no intention of fraud and that he always acted in the best interest of his customers and investors.
He also claimed that Ellison was lying about her role and involvement in the scandal and that she was an angry former employee who was out to get Bankman-Fried because he broke up with her.
He said that Ellison was trying to save herself from prosecution by cooperating with the government and blaming everything on Bankman-Fried.
Bankman Fried’s Lawyer also Gary Wang’s credibility. Recall that Wang testified earlier that Alameda had unlimited access to FTX customer funds. The lawyer says that Wang was also a co-conspirator who was trying to avoid jail time by testifying against his client.
Overall Bankman-Fried’s lawyer says that his client is confident that he will be vindicated by the jury, as his name and reputation get cleared.
Overall, SBF’s lawyer argues that Bankman-Fried is a pioneer and a leader in the crypto industry and that he had done nothing wrong.
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