Alameda’s $8 billion liability in ‘our Korean friend’s account’: CFTC

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Alameda Research has borrowed billions of dollars in client funds from the FTX exchange. The company’s liabilities were then masked under a pseudonymous account on FTX. Caroline Ellison and Gary Wang pleaded guilty to numerous counts of fraud. LoadingSomething is being loaded.

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The case of “where did the money go” is starting to unravel for crypto exchange FTX.

On Nov. 11, exchange founder Sam Bankman-Fried filed for Chapter 11 bankruptcy protection for FTX and approximately 130 of its affiliates. The decision came after a series of withdrawals left the exchange illiquid.

On Wednesday, Bankman-Fried arrived on American soil after being extradited from the Bahamas. On Friday, The Associated Press reported that a U.S. judge had kept it a secret that two of his former associates, Alameda CEO Caroline Ellison and FTX co-founder Gary Wang, had pleaded guilty to fraud charges and were cooperating. with the federal government. Prosecutors feared that Bankman-Fried could fight extradition if he knew his partners had turned against him.

Alameda Research, a trading and investment fund launched by Bankman-Fried, had borrowed billions of dollars from the stock market, losing them through a series of bad trades and trades. It was later revealed that this money came from customer deposits.

A lawsuit filed by the Commodity Futures Trading Commission on Dec. 13 says Bankman-Fried ordered FTX executives to transfer Alameda’s approximately $8 billion in liabilities to an unknown client account on FTX’s systems.

The lawsuit also claimed that Bankman-Fried would later refer to this account as “our Korean friend’s account” and/or “the strange Korean account”. He added that although it is a sub-account of Alameda, it does not have the investment firm’s typical email id “@alameda-research.com”. The notes linked to the account labeled it as “FTX fiat old”.

The lawsuit claims this helped mask Alameda’s negative balance on FTX. However, the account had the same privileges as Alameda accounts, including exemption from liquidation features.

A day later, on December 14, Bloomberg reported that a GitHub account under the name of Nishad Singh, the former director of engineering at FTX, had created code that would hide Alameda’s inflated liabilities on the exchange. .

The FTX implosion sent shockwaves throughout the crypto community. Months before his downfall, Bankman-Fried assured investors that the worst of the crypto market’s liquidity crisis was likely over. He added that he still had “a few billion” on hand to shore up struggling companies that could further destabilize the digital asset industry.

Bankman-Fried walked out of federal court in New York on Thursday after being released on $250 million bail.

On December 18, Ellison pleaded guilty to seven counts of federal fraud, including conspiracy to commit wire fraud on FTX customers and money laundering. She could face up to 110 years in prison but has agreed to cooperate fully in return for a lesser sentence.

Wang pleaded guilty to four similar counts. He faces up to 50 years in prison and has also agreed to cooperate with the federal government.

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