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Sam Bankman-Fried directed colleagues to create seven “alternatives” for Alameda Research, according to testimony from Caroline Ellison, the former chief executive of the exchange’s trading division. Balance sheets, some of which concealed billions of dollars in kickbacks to FTX executives.
The 28-year-old ran FTX subsidiary Alameda until the company collapsed in November 2022. She said she was ordered to cover up how the business “channeled” nearly $4.6 billion to Bankman-Fried and senior staff and other employees. In fact, the trading group “borrowed $10 billion from FTX clients.”
Testifying at Bankman-Fried’s criminal trial in Manhattan, Ellison added that a version of the Alameda account that made its “assets appear larger” was given to cryptocurrency lender Genesis, which Institutions called in loans amid a sharp decline in the industry. The court was shown a spreadsheet in which rows that previously contained references to stolen customer funds (titled “FTX Borrow”) had been deleted. Loans to FTX executives and some investments in new startups were also obscured.
Months later, FTX collapsed after the revelation of a multi-billion-dollar hole in its balance sheet, caused largely by withdrawals caused by secret loans to Alameda. Genesis’ lending arm went bankrupt in January 2023, owing creditors more than $3 billion.
Ellison, who pleaded guilty to fraud last year, was the star witness in the Bankman-Fried trial and faces decades in prison if convicted.
Ellison, who dated Bankman-Fried for a time, said during questioning by prosecutors on Wednesday that she “did think (the falsified balance sheet) was dishonest” and was sending the documents to Genesis. Later, she was “in a state of fear.”
“My biggest fear is that if someone finds out, everything will collapse,” she said of the disguised loans provided to FTX executives and Alameda’s secret use of billions of dollars in client funds.
Ellison, who began testifying on Tuesday, described the former tycoon as the mastermind of a scheme that allowed Alameda to gamble on billions of dollars of FTX clients’ funds and concealed it from investors, reporters and the public. An arrangement.
Ellison also suggested the former cryptocurrency tycoon was involved in a Chinese bribery scandal. She testified that in 2021, Bankman-Fried ordered a $150 million payment to officials to release about $1 billion in funds held by two Chinese cryptocurrency exchanges that had been frozen in a money laundering investigation.
She said the move was taken after attempts to limit losses through counter-trading using accounts in the names of “Thai prostitutes” failed.
Allison said that when a colleague whose father was a Chinese government official objected, Bankman-Fried “yelled at her to shut up.”
In her own notes from the same period, which were passed into evidence, Ellison referred to the transaction in question as “that thing”, which she said was because she “didn’t want to put it in writing that we paid…”. . . bribe”.
Ellison said the silence came after Bankman-Fried repeatedly urged his colleagues to use ephemeral messaging to avoid “legal trouble.”
“Sam instructed us to use the disappearing message setting on the signal . . . He said we should be very careful about what we write down,” she added.
In August 2022, as Alameda’s liabilities grew, Allison said Bankman-Fried accused her of not adequately hedging the company’s investments, calling it “a big mistake and my fault.”
Asked about the meeting, Allison recalled: “I got very upset, started crying, and had a hard time ending the conversation.”
Bankman-Fried has pleaded not guilty. His attorneys are scheduled to question Allison later Wednesday.
Ellison also corroborated Bankman-Fried’s moral compass, claiming that he “said he was a utilitarian, and he believed that the way people tried to justify rules like ‘don’t lie’ and ‘don’t steal’ didn’t work ”.
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