{"id":15801,"date":"2022-12-24T02:31:13","date_gmt":"2022-12-24T02:31:13","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/caroline-ellisons-testimony-claims-ftx-boss-sbf-directed-her-to-co-mingle-customer-funds-since-2019-bitcoin-news\/"},"modified":"2022-12-24T02:31:13","modified_gmt":"2022-12-24T02:31:13","slug":"caroline-ellisons-testimony-claims-ftx-boss-sbf-directed-her-to-co-mingle-customer-funds-since-2019-bitcoin-news","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/caroline-ellisons-testimony-claims-ftx-boss-sbf-directed-her-to-co-mingle-customer-funds-since-2019-bitcoin-news\/","title":{"rendered":"Caroline Ellison’s Testimony Claims FTX Boss SBF Directed Her to Co-Mingle Customer Funds Since 2019 \u2013 Bitcoin News"},"content":{"rendered":"

(Originally posted on : Bitcoin News )<\/b>
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On Dec. 23, 2022, Matthew Russell Lee from the Inner City Press published the recently unsealed guilty plea transcript of Caroline Ellison, Alameda Research\u2019s former CEO. In her statements, Ellison describes that she was the co-CEO and CEO of Alameda, and under those roles, she reported directly to the former FTX CEO Sam Bankman-Fried (SBF). The ex-Alameda CEO\u2019s testimony details that she was fully aware from 2019 to 2022, that Alameda Research had access to a special borrowing facility that allowed the company to maintain an unlimited line of credit with zero collateral. The \u2018borrowing facility,\u2019 according to Ellison, was FTX\u2019s customer funds. <\/strong><\/p>\n

Caroline Ellison Details FTX\u2019s Misconduct With Alameda and the Co-Mingling of Customer Funds Started From the Very Beginning<\/h2>\n

Following the unsealing of Caroline Ellison\u2019s plea deal, Inner City Press<\/a> reporter Matthew Russell Lee<\/a> published a tweet storm<\/a> that featured screenshots of Ellison\u2019s unsealed guilty plea transcript. Russell Lee said that the plea arraignment was \u201cheld in secret, and not docketed until today, once Bankman-Fried was freed on $250 [million] bond.\u201d If Ellison\u2019s testimony is true, the document highlights a number of infractions both FTX and Alameda executives partook in since 2019.<\/p>\n

\u201cFrom 2019 to 2022, I was aware that Alameda was provided access to a borrowing facility on FTX.com, the cryptocurrency exchange run by Mr. Bankman-Fried. I understood that executives had implemented special settings on Alameda\u2019s FTX.com account that permitted Alameda to maintain negative balances in fiat currencies and cryptocurrencies,\u201d Ellison\u2019s testimony details. \u201cIn practical terms, this arrangement permitted Alameda access to 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 FTX.com\u2019s liquidation protocols,\u201d the ex-Alameda CEO added.<\/p>\n

Ellison\u2019s account of the situation continued:<\/p>\n

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I understood that if Alameda had significant negative balances in a particular currency, it meant that Alameda was borrowing funds that customers had deposited on the exchange.<\/p>\n<\/blockquote>\n

Ellison Understood FTX Customer Funds Were Used to \u2018Finance FTX\u2019s Loans to Alameda,\u2019 Ex-Alameda CEO Is \u2018Truly Sorry\u2019 for What She Did<\/h2>\n

Ellison was aware that many of Alameda\u2019s investments were illiquid, and she said she fully agreed to borrow funds from FTX\u2019s coffers. \u201cWhile I was co-CEO and then CEO, I understood that Alameda had numerous large illiquid investments and had lent a lot of money to Mr. Bankman-Fried and other FTX executives,\u201d Ellison\u2019s testimony explains. \u201cI also understood that Alameda had financed the investments with short-term and open-term loans worth several billion dollars from external lenders in the cryptocurrency industry. In or around June 2022, I agreed to borrow several billion dollars from FTX to repay those loans. I understood that FTX would need to use customer funds to finance its loans to Alameda.\u201d<\/p>\n

Ellison further added:<\/p>\n

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I also understood that many FTX customers invested in crypto derivatives and that most FTX customers did not expect that FTX would lend out their digital asset holdings and fiat currency deposits to Alameda in this fashion.<\/p>\n<\/blockquote>\n

Furthermore, Ellison said in or around July 2022 to October 2022, she agreed with SBF to \u201cprovide materially misleading financial statements to Alameda\u2019s lenders.\u201d Ellison said that the team served lenders botched quarterly reports that obfuscated \u201cthe extent of Alameda\u2019s borrowing.\u201d The ex-Alameda CEO also elaborated that she was aware that FTX\u2019s equity investors were kept in the dark about the nature of FTX\u2019s and Alameda\u2019s co-mingled relationship. \u201cI agreed with Mr. Bankman-Fried and others not to publicly disclose the true nature of the relationship between Alameda and FTX, including Alameda\u2019s credit arrangement. I also understood that Mr. Bankman-Fried and others concealed the source and nature of those funds,\u201d Ellison\u2019s account of the situation details.<\/p>\n

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Caroline Ellison is a Stanford graduate who graduated in 2016 with a bachelor\u2019s degree in mathematics. She then worked for the quantitative trading firm Jane Street before working for Alameda Research. Ellison became an Alameda employee in March 2018 and after Sam Trabucco left in August 2022, she became CEO. Ellison was fired from her position by John J. Ray III on Nov. 11, 2022, when FTX filed for Chapter 11 bankruptcy protection.<\/figcaption><\/figure>\n

According to SBF\u2019s alleged ex-girlfriend, Ellison said she was very sorry for what she has done. At the end of her transcript, she apologizes a great deal for what she did. The testimony from Ellison is very different than that of SBF\u2019s stories, when he managed<\/a> to do a media tour<\/a> for a month before he was arrested<\/a> and he apologized a great deal. While SBF apologized a lot, he never admitted to doing any wrongdoing in terms of fraud or committing any financial misconduct. SBF further said that he did not run Alameda Research, and stressed that he had little knowledge of the trading firm\u2019s business dealings. Speaking virtually at the New York Times\u2019 Dealbook Summit with Andrew Ross Sorkin, SBF insisted<\/a> he \u201cdidn\u2019t knowingly co-mingle funds.\u201d<\/p>\n

As far as Alameda Research was concerned, SBF said:<\/p>\n

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I didn\u2019t know the size of their position. I wasn\u2019t running Alameda \u2014 I didn\u2019t know exactly what was going on.<\/p>\n<\/blockquote>\n

Ellison\u2019s unsealed testimony completely contradicts SBF\u2019s position during his media tour, and not only does she apologize, she explains a number of misdeeds she personally committed. \u201cI am truly sorry for what I did,\u201d Ellison concluded. \u201cI knew that it was wrong. I want to apologize for my actions to the affected customers of FTX, lenders to Alameda, and investors in FTX. Since FTX and Alameda collapsed in November 2022, I have worked hard to assist with the recovery of assets for the benefit of customers and to cooperate with the government\u2019s investigation. I am here today to accept my responsibility for my actions by pleading guilty.\u201d When the judge asked Ellison if she knew what she did was illegal, she replied \u201cyes.\u201d<\/p>\n

Billionaire Bill Ackman\u2019s Recent FTX Twitter Thread Slammed<\/h2>\n

Interestingly, billionaire Bill Ackman <\/span>tweeted<\/span><\/a> about SBF and cohorts the day prior on Dec. 22, and decided to describe the case as a business \u201cfailure.\u201d \u201cOne that is \u201cso frightening that they can\u2019t acknowledge it, and they do stupid sh-t to avoid the embarrassment and the come down,\u201d Ackman wrote<\/a>. Ackman\u2019s most recent FTX Twitter thread wasn\u2019t received well by a great majority of commenters who told Ackman that SBF and FTX are being convicted of starting the fraud from the very beginning. Ellison\u2019s testimony even notes that her special Alameda treatment and the co-mingling of customer funds began in 2019. <\/span><\/p>\n

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Bitcoin proponent Nic Carter, for instance, replied to Ackman and <\/span>said<\/span><\/a>: \u201cThey were engaging in fraud from day 1.\u201d Coinshares executive Meltem Demirors also responded to Ackman\u2019s tweets and <\/span>remarked:<\/span><\/a> \u201cThey were depositing FTX customer funds directly into Alameda\u2019s bank account from day 1.\u201d Ackman was <\/span>reminded<\/span><\/a> on several occasions in the thread that maybe he should read the SEC charges<\/a>, before claiming that FTX was a \u201clegitimate profitable exchange started by an MIT grad with backing from top VCs at a massive valuation.\u201d<\/span><\/p>\n

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\nTags in this story
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Alameda\u2019s lenders<\/a>, Bankman-Fried<\/a>, Bill Ackman<\/a>, billionaire Bill Ackman<\/a>, Caroline Ellison<\/a>, ceo<\/a>, CFTC<\/a>, Charges<\/a>, Co-CEO<\/a>, co-mingled relationship<\/a>, Cooperation<\/a>, Customer Money<\/a>, FBI<\/a>, federal court<\/a>, Fraud Charges<\/a>, ftx<\/a>, FTX Bankruptcy<\/a>, FTX collapse<\/a>, FTX customers<\/a>, Gary Wang<\/a>, Inner City Press<\/a>, Law Enforcement<\/a>, Matthew Russell Lee<\/a>, new york<\/a>, NY<\/a>, Sam Bankman-Fried<\/a>, Sam Trabucco<\/a>, sbf<\/a>, SDNY<\/a>, SEC<\/a>, Unsealed Testimony<\/a><\/div>\n<\/div>\n

What do you think about Caroline Ellison\u2019s testimony and her side of the story? Let us know what you think about this subject in the comments section below.<\/strong><\/em><\/p>\n

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\nJamie Redman <\/h6>\n

\nJamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Image Credits<\/b>: Shutterstock, Pixabay, Wiki Commons<\/em><\/p>\n

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Disclaimer<\/strong>: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com<\/a> does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.<\/p>\n<\/div>\n

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