Alameda CEO Ellison says she and SBF knowingly misled FTX’s creditors

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Former Alameda Research CEO Caroline Ellison said she and FTX co-founder Sam Bankman-Fried knowingly misled lenders about the amount the now-bankrupt trading firm was borrowing from the cryptocurrency exchange.

Ellison gave his first public account of his actions at a Dec. 19 hearing in Manhattan federal court. “I knew it was wrong,” she said, according to a transcript of the hearing. FTX co-founder Gary Wang also made a statement that day.

“From 2019 to 2022, I knew that Alameda was granted access to a loan facility on FTX.com, the cryptocurrency exchange operated by Mr. Bankman-Fried,” Ellison said. “Effectively, this arrangement allowed Alameda access to an unlimited line of credit without being required to provide collateral, without having negative balances and without being subject to a margin requirement in FTX.com’s liquidation protocols.”

Bankman-Fried, 30, is accused of orchestrating a years-long fraud in which he used billions of dollars in FTX client funds for personal expenses and high-risk bets through Alameda. In interviews after FTX’s bankruptcy, Bankman-Fried repeatedly said she didn’t know what was going on in Alameda, a defense undermined by statements from Wang and Ellison.

Ellison and Wang have pleaded guilty to fraud charges and are cooperating with federal prosecutors in Manhattan. A representative for Bankman-Fried did not immediately return a request for comment on Wang and Allison’s statements. The former FTX CEO was released on $250 million bail Thursday.

According to Ellison, “if Alameda’s FTX accounts had significant negative balances in any particular currency, it means that Alameda was borrowing funds that FTX customers had deposited into the exchange.”

She said she and Bankman-Fried agreed to hide that arrangement from lenders and created false financial statements to hide the size of Alameda’s loan, including billions in loans made to FTX executives.

In his own hearing, Wang said he was “directed” to make changes to the FTX platform code that he knew would give special privileges to Alameda, and that false claims were made to customers and investors. Wang was the Chief Technology Officer at FTX.

“I knew what I was doing was wrong,” Wang said, according to the transcript.

Ellison previously denied that Alameda received any special treatment from FTX. “We’re at arm’s length and we’re not treated any differently than other market makers,” Ellison told Bloomberg News in an interview over the summer.

Prosecutors said they used witness testimony, digital communications on apps like Signal and Slack, letters to investors and creditors, and software and databases related to the collapsed FTX empire to build their case.

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