On October 10, former Alameda Research CEO Caroline Ellison testified at the Sam Bankman-Fried (SBF) hearing. She admitted to the crimes committed under the leadership of her ex-boyfriend and spoke about his great ambitions.
First readings
28-year-old Ellison came to the courtroom in a gray suit over a pink blouse and behaved quite restrained, Business Insider journalists report. The former Alameda CEO answered questions loud and clear, pointing to SBF just 30 seconds into her speech.
According to the witness, Alameda had access to FTX customer deposits with an unlimited line of credit. At the same time, some of the funds went directly to the company’s bank accounts.
She explained that the practice of using client assets began at the direction of Bankman-Fried when he was CEO of Alameda Research.
Allison also sent fraudulent reports to banks on orders from her boss to cover up the company’s precarious position.
Since FTX had a $65 billion backdoor to the affiliate firm, this practice allowed it to “borrow” certain tokens from users for arbitrage and other manipulations.
The situation was “somewhat worrying” for Ellison, given that clients and investors had not been warned about the arrangement.
SBF simply brushed aside questions about reports on dubious transactions, says the businessman’s former lover. He believed that auditors simply would not have paid attention to this.
When Alameda had trouble finding new lenders, Bankman-Fried came up with the FTT token, giving the partner about 60-70% of the coin’s supply for free. The head of FTX also instructed Ellison to secretly buy the asset if the price fell below $1.
With a huge amount of FTT on its balance sheet, Alameda could obtain perpetual loans from lenders like Genesis.
Bankman-Frida – for president
Allison was later asked about the ambitions of the FTX founder. The girl saw in him a desire to become a significant player in the world of business and politics.
She said that their relationship had developed “in fits and starts” since the fall of 2019. Allison and Bankman-Fried met at work at the investment firm Jane Street, where the girl was doing an internship.
Later, her boyfriend convinced her to join the hedge fund Alameda Research as a trader, and in 2021 she became the CEO.
The head of the stock exchange once admitted that the probability of becoming “someday president” for him was 5%.
In his opinion, political donations were a good investment. In 2020, Bankman-Fried was one of the top 20 donors to current US President Joe Biden, contributing $5.22 million.
“He thought it was a very good investment. You could get very high profits from this for relatively small amounts of money,” says Ellison.
She also added that SBF described itself as “truly risk neutral.”
Obsession with capital
As Alameda borrowed more and more, its supply dried up. Moreover, it was supported by the so-called “Samcoins” – FTT, Serum, Maps and Oxygen. Ellison described these coins as illiquid, The Block reports.
However, Bankman-Fried still had capital issues, such as when he wanted to buy back Binance’s FTX shares in 2021.
However, as the crypto exchange grew, Alameda gained access to an increasingly large source of immediate funding: customer deposits. This is where the money came from for the $2.1 billion deal with Binance.
By the end of 2021, SBF expressed an urgent need to borrow “as much capital as possible,” Ellison testified. Around the same time, he asked his girlfriend to prepare “billions” for venture capital investments.
The ex-CEO of Alameda warned of high risks that would put the company in a dangerous position, but Bankman-Fried did not back down and announced the creation of FTX Ventures.
Alameda’s debts continued to grow in 2022, even those that Ellison herself did not suspect. It wasn’t until May that she learned of $5 billion spent on dubious investments and political contributions.
At the time, Alameda’s net asset value was “quite positive,” given its “fair leverage,” Ellison said. However, the situation changed dramatically in the same month after the collapse of Terra and the UST stablecoin.
Ellison previously pleaded guilty to charges related to the collapse of the platform and agreed to cooperate with the investigation. The ex-head of Alameda spoke about manipulating the price of the FTT utility token.
Allison also admitted to knowingly defrauding creditors. She said she “knew it was wrong.” The ex-head of Alameda, along with the former CEO of FTX, hid agreements from investors and falsified financial statements.
Let us remind you that the US Attorney’s Office charged SBF with 13 criminal offenses. He did not admit guilt on any of the counts.
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