Caroline Ellison ‘knew it was wrong,’ implicates Sam Bankman Fried

[ad_1]

Caroline Ellison, the former CEO of collapsed algorithmic trading firm Alameda, told a judge she agreed with disgraced former FTX CEO Sam Bankman-Fried to provide “materially misleading to Alameda lenders”.

According to a transcript of his courtroom address, released Dec. 19 but kept under seal until Bankman-Fried was released on $250 million bail three days later, Ellison told the court judge of US District Ronnie Abrams: “I’m so sorry for what I did.” knew it was wrong.”

The court asked him to clarify. “Did you also know it was illegal?”

“Yes,” Ellison replied.

Ellison, along with FTX co-founder Gary Wang, pleaded guilty last week to federal charges related to their role in the frauds that contributed to FTX’s collapse, and the two are cooperating with the Southern District of New York. News of their plea deals was held back until Bankman-Fried was en route to the United States from the Bahamas.

The misleading financial statements were in the form of “quarterly balance sheets that hid the extent of Alameda’s borrowings and the billions of dollars in loans Alameda had made,” Ellison said.

“I have agreed with Mr. Bankman-Fried and others not to publicly disclose the true nature of Alameda’s relationship with FTX, including Alameda’s credit agreement,” she said.

The transcript was reviewed and reported separately by The New York Times, Reuters and Bloomberg. Portions were also posted on Twitter by Matthew Russell Lee of Inner City Press.

Ellison’s statement confirmed earlier reports that Alameda received special treatment from FTX, which was able to freely withdraw money from its sister company.

“I understand that FTX executives have implemented special settings on Alameda’s FTX.com account that allow Alameda to maintain negative balances in various fiat currencies and cryptocurrencies,” she said. declared. “In concrete terms, this arrangement allowed Alameda to access an unlimited line of credit without being required to post collateral, without having to pay interest on negative balances and without being subject to margin calls or protocols of liquidation of FTX.com.”

Ellison further admitted that she and others knew when Alameda was over-leveraged and what that meant.

“I understood that if Alameda’s FTX accounts had large negative balances in a particular currency, that meant Alameda was borrowing funds that FTX clients were depositing on the exchange.”

As for Bankman-Fried, Ellison said he and other executives secured loans from Alameda, which in the meantime was making “many large illiquid venture capital investments.”

To repay those loans, Ellison said she “agreed with others” to borrow billions of dollars from FTX.

“I understood that FTX would need to use customer funds to fund its loans to Alameda,” she said. “Most FTX customers did not expect FTX to lend their digital assets and fiat currency deposits to Alameda in this way.”

Ellison also had a message for the victims of the business collapse.

“I want to apologize for my actions to affected FTX customers, Alameda lenders and FTX investors,” she said. “Since FTX and Alameda collapsed in November 2022, I have worked hard to assist in the recovery of assets for the benefit of clients and to cooperate with the government investigation.”

“I am here today to accept responsibility for my actions by pleading guilty,” she concluded.

Stay up to date with crypto news, get daily updates in your inbox.

[ad_2]