The former CEO of Alameda Research, Caroline Ellison, revealed that she and FTX co-founder Sam Bankman-Fried deliberately provided false information about the amount of money that the now bankrupt trading firm was receiving from its cryptocurrency exchange partner.
At the Dec. 19 plea hearing in Manhattan federal court, Ellison publicly detailed her wrongdoings for the first time. “I was aware that it was illicit,” she declared as per a transcript of the hearing. Gary Wang, co-founder and former Chief Technology Officer of FTX also gave a statement that day.
“From 2019 through 2022, I was aware that Alameda was provided access to a borrowing facility on FTX.com, the cryptocurrency exchange run by Mr. Bankman-Fried,” Ellison said. “In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having negative balances and without being subject to margin calls on FTX.com’s liquidation protocols.”
Bankman-Fried, aged 30, stands accused of organizing a long-term scam in which he leveraged billions of FTX customer dollars for personal use and high stakes bets through Alameda. In interviews following FTX’s collapse, Bankman-Fried constantly asserted he had no knowledge of events taking place at Alameda. This assertion was refuted by Wang and Ellison’s statements, however.
Ellison declared that if Alameda had any noticeable negative balances in a certain currency, it meant that the firm was forced to borrow funds from customers who put money on FTX. She also disclosed that she and Bankman-Fried had come to an understanding about concealing their plan from creditors, constructing fraudulent financial records to veil Alameda’s massive debt — which included billions of dollars issued as loans for FTX executives.
In his own plea hearing, Wang affirmed that he was instructed to make modifications in the code of FTX platform which would provide Alameda with special advantages, while at the same time misleading customers and investors.
“I knew what I was doing was wrong,” Wang said.
On Thursday, a New York federal judge ruled to release Bankman-Fried from custody on a $250 million bond while awaiting his trial for fraud and other criminal charges. Judge Ronnie Abrams will preside over the defendant’s next hearing on January 3rd in New York City, where he is slated to enter his plea and be formally arraigned.
To build their case, prosecutors said they are collecting witness testimonies and digital communications from apps such as Signal and Slack. Additionally, they are also utilizing letters to investors and lenders in conjunction with software/databases linked to the collapsed FTX empire.
Reference: Fortune
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