When delving into the realm of Alameda and its intricate connection with FTX, a cascade of pivotal revelations surfaces. Foremost among these revelations, Caroline Ellison, the former CEO of Alameda, confirmed that Alameda consistently maintained access to the financial resources of FTX customers.
The ongoing trial of the former FTX CEO, Sam Bankman-Fried, has unfurled a tapestry of explosive insights, primarily through testimonies furnished by former prominent figures from FTX and Alameda Research. The latest court proceedings on October 12 witnessed Caroline Ellison’s testimony for the third consecutive day. In a pivotal moment during the trial, a recording emerged from a meeting she conducted with Alameda personnel on November 9, 2022, just days before the FTX empire’s cataclysmic downfall.
This meeting, convened in Hong Kong and attended by nearly half of Alameda’s workforce, served as the crux of Ellison’s revelation about the unfolding narrative involving the cryptocurrency exchange. In a candid admission, Ellison disclosed intricate details about Alameda’s intricate financial interweaving with FTX. An exclusive recording of this meeting has fallen into the hands of Cointelegraph, unveiling four striking elements.
The cornerstone of these revelations came early in the meeting when Ellison divulged that Alameda had obtained a substantial loan from FTX, extending over the course of a year. She confessed that Alameda had invested in a series of illiquid ventures using these borrowed funds. However, the advent of a market downturn resulted in FTX calling in Alameda’s loan positions, consequently creating a chasm in FTX’s balance sheet. This precarious situation provoked market panic, compelling users to hastily withdraw their funds. In response, FTX temporarily suspended withdrawals, which ultimately precipitated the exchange’s swift collapse.
When a concerned employee present at the meeting queried Ellison about how FTX intended to reimburse its users, she revealed that the cryptocurrency exchange was contemplating raising additional capital to bridge the financial chasm. She expressed, “FTX is endeavoring to secure additional funds for this purpose. Nevertheless, after the market’s tumultuous descent, investors displayed a reluctance to participate. In hindsight, this waiting period of several months for a more favorable market environment and a subsequent capital raise seems to have faltered.”
During the court proceedings, Christian Drappi, a former software engineer at Alameda who was a witness to the meeting, found Ellison’s response regarding customer reimbursement disconcerting. He was perplexed, as he had not previously encountered a scenario where investors were required to compensate customers for the company’s financial missteps.
In a notable moment during the playback of the secret recording in court, it was pointed out that Ellison emitted a nervous laughter, a behavior she often displayed when under pressure. When questioned about the origin of the idea to utilize FTX customer funds to cover Alameda’s loan losses, she responded with a chuckle, “Well, I suppose it was Sam’s idea.”
The intrigue deepened as another staff member inquired about Alameda’s access to FTX and the duration of their reliance on FTX customers’ funds to mend their balance sheet. Ellison responded candidly, stating, “As far as I am aware, FTX has consistently granted Alameda access to borrow user funds.”