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Caroline Ellison

FTX: Alameda’s Secret Audio Exposes Financial Misconduct

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An undisclosed audio clip has emerged, shedding light on how Alameda’s employees, affiliated with FTX, learned about the dire situations faced by both entities. The 75-minute recording, secretly captured by Rick Best during an all-hands meeting in Hong Kong on November 9, 2022, features ex-CEO Caroline Ellison divulging startling details about Alameda’s financial precariousness.

Ellison revealed that Alameda had borrowed significant amounts through open-term loans to invest in illiquid assets, predominantly in FTX. During the meeting, she admitted that Alameda had utilized user funds from the SBF-led exchange, leading to a shortfall in user funds. To the astonishment of the 15 employees present, it was revealed that Alameda had been borrowing user funds without their knowledge, causing FTX to face financial challenges.

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FTX: Alameda's Secret Audio Exposes Financial Misconduct 2

Christian Drappi, a former software engineer at Alameda, provided a copy of the audio to the prosecutors. Drappi’s testimony exposed the extent of the misuse of FTX user deposits by Alameda. He questioned Ellison about her awareness of these activities, leading to a tense exchange where Ellison hesitated to answer Drappi’s inquiries.

Ellison later confessed that Bankman-Fried, herself, Gary Wang, and Nishad Singh—the latter three having all accepted plea deals—were aware. When asked who instructed the use of FTX customer funds, she hesitantly responded, “Um, Sam, I suppose?” with a nervous giggle.

Alameda Staff Had No Clue On Fund Withdrawal From FTX

Drappi, who joined Alameda almost a year ago, had no knowledge of Bankman-Fried’s alleged conspiracy to withdraw customer funds from FTX to spend—through Alameda—on venture investments, loan repayments, and risky crypto bets. That changed on Nov. 8, at approximately 11 p.m.

Ellison’s revelations, including undisclosed details about the abandoned acquisition of FTX by Binance, left employees stunned. Alameda Research Engineer Aditya Bharadwaj stated that it became evident that there was no future for the company, leading to the abrupt departure of the staff shortly after the meeting.

The shocking revelations stand as a stark reminder of the importance of trust, integrity, and adherence to ethical standards in the fast-paced world of cryptocurrency, urging companies and investors to exercise vigilance in their dealings.

SBF Alleges Binance’s Secret Plot In FTX Downfall

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The saga behind SBF’s once-thriving crypto empire has taken a dark turn, exposing a trail of secrets that could rival a Hollywood thriller. From mishandling customers’ funds for personal luxuries to plotting against rivals and a love story turned sour, this infamous incident reads like a gripping movie script. The latest revelation emerged in the form of a November 2022 internal document, presented as evidence in the ongoing trial.

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SBF Alleges Binance's Secret Plot In FTX Downfall 4

In the memo, Bankman-Fried accused Binance, FTX’s rival, of orchestrating a malicious PR campaign against them. He alleged that Binance leaked an Alameda balance sheet to the media, triggering a chain of events that led to FTX’s downfall. To recall, CoinDesk, on November 2, published a report based on the leaked balance sheet, hinting at FTX’s vulnerable position. The after-effects of the article were catastrophic, causing ripples across the crypto industry. Binance, at the time of writing, remains silent in response to these allegations.

Next, the document also highlights TRON founder and Huobi’s advisor, Justin Sun, whom Bankman-Fried once contemplated as a potential investor to approach. However, he realized that Sun was closely associated with CZ. In his desperate efforts, SBF also pondered sharing a confident series of tweets, a move that Ellison confirmed Bankman-Fried had indeed executed.

Furthermore, in the document, the former CEO noted that the then-FTX had substantial capital but limited liquidity. Caroline Ellison, SBF’s former girlfriend and a star witness, clarified during the court proceedings that this indicated that out of the $12 billion in client assets on the exchange, FTX had only one-third available, amounting to “$4 billion to process their withdrawals.”

SBF’s Bribe To Chinese Officials

Amidst the trial, a pivotal moment arrived when Ellison, the ex-head of FTX-linked trading firm Alameda Research, delivered a damning testimony on October 10. She revealed Bankman-Fried’s attempts to unlock frozen funds on Asian crypto exchanges, detailing intricate schemes involving imbalanced trades and even bribing Chinese government officials.

Bankman-Fried faces seven fraud charges in this trial. Even if found innocent, he is slated for a second trial in March, facing additional counts. The courtroom drama continues, unfolding a scandalous tale that has gripped the crypto community.

FTX’s Dark Days: Bankman-Fried’s Last-Ditch Efforts Revealed By Caroline Ellison

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Former Alameda Research CEO Caroline Ellison has revealed more details about the tumultuous final months of FTX and its CEO, Sam “SBF” Bankman-Fried, during her testimony in the ongoing trial. Ellison shed light on various aspects of FTX’s operations and Bankman-Fried’s efforts to navigate the company’s challenges.

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One of the key revelations was that in May 2022, Alameda Re­search faced a significant financial strain due to a marke­t downturn. Lenders like Ge­nesis Capital demanded the­ repayment of millions of dollars in loans, exace­rbating the already immense­ pressure on the company. During this challenging period, Ellison openly expressed the stress she experienced. 

Gene­sis Capital, one of the lende­rs, is reported to have re­called $500 million in loans. According to the testimony, Alame­da Research had a debt of over $13 billion on its credit line with FTX and more than $1.3 billion in ope­n-term loans. 

FTX Bankman-Fried’s Survival Plans

To address this situation, Bankman-Fried instructe­d Ellison to explore alternative ways of presenting the company’s financial information to le­nders, especially Ge­nesis. The objective was to protect Alameda’s reputation and prevent a complete loan re­call.

Ellison disclosed that she worked on multiple alternative spreadsheets for Genesis, which presented a less alarming picture of Alameda’s financial situation. These altered documents appeared to understate the true extent of the company’s financial liabilities.

Bankman-Fried’s plans to weather the storm. In the months preceding the collapse, Bankman-Fried had exhibited anxiety about Alameda, such as purchasing shares in Snapchat, securing investments from Saudi royalty, and attempting to persuade regulators to tighten their grip on rival crypto exchange Binance.

Ellison testified that a significant crash in the Terra ecosystem in May 2022 prompted Bankman-Fried to contemplate shutting down Alameda and seek a massive capital infusion of $1 billion from the Saudi Prince, known for his blockchain gaming investments through Saudi Arabia’s sovereign wealth fund.

Bankman-Fried’s priorities also included pushing regulators to intensify scrutiny on Binance, a strategy aimed at bolstering FTX’s market share. However, Ellison did not elaborate on the specific tactics Bankman-Fried intended to employ in this regard. Bankman-Fried was further seeking additional funds from crypto lender BlockFi, which had already extended loans of over $660 million to Alameda.

During her testimony, Ellison also mentioned a $150 million bribe that FTX allegedly paid to a Chinese official in 2021 to release funds frozen during a money laundering investigation. However, this alleged bribe is not part of the current trial in the United States.

However, these trials are unfolding valuable insights into the challenges faced by FTX in managing financial difficulties and re­gulatory concerns. Caroline Ellison’s cross-examination by the­ defense has been scheduled for Octobe­r 12th, and further developme­nts are expected to follow.

Related Reading | Bitcoin’s Bullish Roar: Dominates 2023, Outpaces Traditional Assets with 63% YTD Surge 

SBF’s Former Flame Reveals Startling Secrets

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Former Alameda CEO Caroline Ellison, a pivotal witness in the SBF trial, recently testified in a courtroom filled with tension and anticipation. Mincing no words, Ellison revealed that she had carried out fraudulent actions under the influence of her ex-boyfriend, who was also the founder of the FTX exchange at the time. The focal point of the case against SBF revolves around the transfer of billions of dollars from customer accounts at FTX to Alameda. This significant financial movement left Alameda with a substantial deficit in its balance sheet after the cryptocurrency markets took a downturn in 2022.

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Image Credit: Jacob Silverman

Appearing as a key witness for the government, Ellison was asked about her involvement in criminal activities and the individuals she collaborated with. In response, she confessed, “I sent balance sheets at the direction of SBF that made Alameda’s balances look less risky to investors.” She also admitted that Alameda had utilized funds from FTX for its own investments, following Bankman-Fried’s instructions to utilize FTX funds while also ensuring that a portion of the money remained within FTX to fulfill customer withdrawal requests.

A considerable portion of these funds was directed towards loans extended to individuals within SBF’s inner circle. These funds were utilized for various purposes, including investments and political contributions. Ellison disclosed that Bankman-Fried believed the political donation strategy was highly effective, offering substantial political influence at a relatively low cost. However, she expressed her discomfort with the loans provided to insiders, stating, “I had reservations; it appeared as if Alameda was channeling funds to FTX executives.”

SBF Vs Ellison’s Tangled Legal Drama

Ellison’s testimony was fraught with personal history, marked by her guilty plea to fraud and conspiracy charges the previous year. Throughout the trial, both sides engaged in a heated exchange, with Bankman-Fried’s attorney, Cohen, attempting to shift blame onto Ellison. Cohen suggested that her financial decisions had left the companies vulnerable to market fluctuations.

Ellison’s testimony adds to a growing list of former FTX insiders who have spoken out against Bankman-Fried. Adam Yedidia, a former FTX developer and part of SBF’s inner circle, had previously told the jurors that Alameda’s actions seemed blatantly unethical. The courtroom drama continues to unfold as more witnesses shed light on the intricate web of financial misconduct involving prominent figures in the cryptocurrency industry.

SBF’s Defense Gambit Backfired? Ex-GF’s Memo Becomes Prosecution’s Weapon

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In a mind-boggling twist, FTX kingpin Sam Bankman-Fried, or SBF, finds himself trapped in an impasse. U.S. prosecutors have unveiled their intention to employ the personal diary of Caroline Ellison, former CEO of Alameda Research, FTX’s sister trading firm, as a piece of evidence against the indicted founder. This unexpected turn has significantly altered the dynamics of SBF’s defense strategy.

The once-private relationship between SBF and Caroline Ellison has evolved into a focal point of the Department of Justice’s expanding case. In a filing dated August 14, submitted to the U.S. District Court for the Southern District of New York, prosecutors unveiled plans to release a collection of Ellison’s personal to-do lists and notes from her tenure at Alameda as crucial evidence.

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Of particular interest is a section titled “Things Sam is Freaking Out About,” which contains pivotal exchanges between Bankman-Fried and Ellison discussing matters pertinent to SBF’s business anxieties. These conversations encompass fundraising initiatives, trading safeguards, and the adverse media attention stemming from the affiliation between Alameda and FTX.

Prosecutors asserted that these notes are not mere “inadmissible hearsay.” Instead, they emphasized that Ellison meticulously documented these exchanges to “memorialize the information provided to her” and to “guide her role within the alleged conspiracy.”

Last month, the U.S. Department of Justice [DOJ] sought an order restraining SBF and other involved parties following the publication of a New York Times article that revealed personal Google documents written by Ellison at the behest of the former FTX founder.

SBF Found Guilty Of Witness Tampering

Prosecutors accused Bankman-Fried of intentionally leaking his former girlfriend’s private diary entries to The New York Times in an attempt to shift blame onto her for the downfall of FTX.

Following U.S. District Court Judge Lewis Kaplan’s ruling, which found him guilty of attempting to influence witnesses, the embattled crypto billionaire was remanded in custody on August 11. Kaplan noted that there is probable cause to believe SBF tampered with witnesses on multiple occasions. His legal team has refuted the allegations.

Caroline Ellison, previously at the helm of Alameda Research, a hedge fund co-founded by SBF, had faced fraud charges herself and was expected to testify against Bankman-Fried in court. This complex narrative highlights the unforeseen turns that legal battles can take within the cryptocurrency realm.

FTX’s Sam Bankman-Fried Legal Plot Thickens: Witness Tampering or Free Speech?

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Sam Bankman-Fried, the former CEO of defunct crypto exchange FTX, has set out to put up a stark defense in response to the revocation of his $250 million bond by U.S. prosecutors. According to a recent Bloomberg report, the indicted founder argued that imprisoning him would violate his “free speech rights.”.

Federal prosecutors have submitted a 12-page document asking for the bond that was given to him in December 2022 to be revoked on the grounds that SBF leaked “personal and raw” diary entries of his ex-girlfriend and former Alameda Research CEO Caroline Ellison to The New York Times in an attempt to malign a “key cooperator testifying against him.”

“The defendant’s latest efforts to interfere with a fair trial—whether deemed attempted witness tampering under Section 1512 or not—more than establish by a preponderance of the evidence both that no set of release conditions will assure the safety of the community and that the defendant is unlikely to abide by any release conditions,” the bail revocation motion argued.

Denying the allegations, Bankman-Fried’s lawyer, Mark Cohen, wrote to Judge Kaplan,

Mr. Bankman-Fried’s contact with the New York Times reporter was not an attempt to intimidate Ms. Ellison or taint the jury pool. It was a proper exercise of his rights to make a fair comment on an article already in progress, for which the reporter already had alternate sources.

Sending Bankman-Fried to jail because he talked to a reporter will raise “serious” First Amendment issues, the lawyer claimed. As the plot deepens in the beleaguered founder’s legal battle, it remains to be seen whether this is a classic case of witness tampering or a legitimate free speech violation.

Meanwhile, FTX received a roundhouse kick from the UCC for its “one-sided” restructuring plan with no crypto specialist at the helm.

FTX Creditors Unsatisfied With The Restructuring Plan

A body representing FTX customers said it is “extremely disappointed” with the exchange’s proposed bankruptcy exit strategy and asserts that the restructuring team at FTX disregarded the group’s concerns.

FTX’s Official Committee of Unsecured Creditors [UCC] said in a court document dated July 31 that it “did not have a single call or meeting” with FTX to discuss its draft Chapter 11 plan, despite repeated requests and prior assurances from the team.

FTX Kingpin Sam Bankman-Fried & 3 Associates Slapped With $1B Lawsuit

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FTX has filed suit against former CEO Sam Bankman-Fried, co-founder Gary Wang, former director of engineering Nishad Singh, and former Alameda Research CEO Caroline Ellison to recover damages from their alleged fund embezzlement.

“They commingled and misused corporate and customer funds, lied to third parties about the business of the FTX Group, joked internally about their tendency to lose track of millions of dollars in assets, and impulsively bought companies with misappropriated funds without conducting any due diligence,” stated the FTX lawyers in the July 20 complaint filed in a U.S. Bankruptcy Court.

Bankman-Fried was hailed as the rising star of the Web 3 world. His exchange, which had once been valued at $32 billion, collapsed overnight as a result of a lack of liquidity and customer withdrawal demands that the business was unable to fulfill.

SBF has been charged with borrowing $170 million from Alameda and moving $10 million in diverted customer cash to his father’s private account, which he reportedly used to pay for his own legal defense. The list of purportedly fraudulent transfers also involved his other partners, Wang and Singh, who each illegally borrowed $54 million and $25 million, respectively.

Another important player in Bankman-Fried’s business empire, Caroline Ellison, the former CEO of Alameda Research, was also accused of misappropriating funds to pay herself a $22.5 million bonus, of which she used $10 million to acquire a stake in the artificial intelligence firm AI Company in 2022, according to the plaintiff’s petition.

FTX: SBF’s Star Witness Revealed

So far, Bankman-Fried’s representatives have chosen not to respond. The former CEO entered a not-guilty plea and his trial is expected to commence later this year. In an effort to retrieve as much money for creditors as possible, FTX’s attorneys under its new CEO have been looking for the firm’s remaining assets.

According to recent reports from The New York Times, prior to the demise of Sam Bankman-Fried’s crypto empires, Alameda Research, and FTX, Ellison is said to have kept secret journals. This information was revealed before Bankman-Fried’s trial, in which she is expected to be a key witness.

Given that Ellison was a key participant in SBF’s operations and a close associate, the discovery of these private records is noteworthy for SBF’s upcoming trial in October.