SBF’s Secret Fears Unveiled: Binance Crackdown, Saudi Millions, and Snapchat Before FTX Implosion

The crypto world is still reeling from the FTX collapse, and the ongoing trial of its former CEO, Sam Bankman-Fried (SBF), is serving up daily doses of shocking revelations. This time, it’s coming straight from the testimony of Caroline Ellison, the former CEO of Alameda Research and once a close confidante of SBF. According to Ellison’s notes presented in court, weeks before the FTX empire crumbled, SBF was reportedly “freaking out” – but perhaps not about the impending disaster you might expect. Instead, his anxieties seemed to be focused on a rather eclectic mix of concerns: getting regulators to target Binance, chasing Saudi Arabian royal funding, and even… Snapchat?

What Was SBF ‘Freaking Out’ About? Ellison’s Explosive Testimony

Caroline Ellison’s testimony in a New York court painted a picture of SBF in the months leading up to FTX’s downfall as someone grappling with a diverse set of pressures. Let’s break down the key areas that seemed to be causing him significant stress, according to Ellison’s notes:

• Binance Crackdown: SBF was allegedly obsessed with getting regulators to “crack down” on Binance, the world’s largest cryptocurrency exchange and a major competitor to FTX. Ellison stated this was aimed at boosting FTX’s market share. How he planned to achieve this regulatory intervention remains unclear, but it highlights a potentially aggressive competitive strategy.
• Saudi Funding Pursuit: Amidst the crypto market turbulence of May 2022 (triggered by the Terra/Luna collapse), SBF reportedly considered shutting down Alameda and desperately sought a massive $1 billion capital injection. His target? A Saudi crown prince, known for investments in blockchain gaming through Saudi Arabia’s sovereign wealth fund. This reveals a high-stakes fundraising effort at a critical juncture.
• Snapchat Investment: Surprisingly, buying shares in Snapchat (SNAP) also featured on SBF’s list of priorities. This seemingly unrelated interest adds another layer of complexity to his pre-collapse activities. Was this a strategic investment, or simply another distraction?
• BlockFi Funding: SBF was also seeking more funds from crypto lender BlockFi, even though Alameda already owed them a staggering $660 million. This indicates increasing financial strain and reliance on borrowed capital.
• Japanese Government Bonds: Trading bonds issued by the Japanese government was another item on SBF’s worry list. The relevance of this in the context of FTX’s issues is not immediately apparent from the provided text, but it suggests a wide range of financial activities.
• “Willie Being Happy”: This cryptic point, “Willie being happy,” is speculated to refer to William MacAskill, SBF’s mentor. This personal concern mixed with major financial and regulatory issues provides a glimpse into the multifaceted pressures SBF was under.

Alameda’s Troubles and the Blame Game

According to Ellison, SBF placed the blame for Alameda’s mounting problems squarely on her shoulders, citing poor hedging strategies. While Ellison admitted that better hedging could have mitigated some of the damage during the crypto winter, she pointed out deeper systemic issues:

• Large Open-Term Loans: Alameda had significant open-term loans, which became a critical vulnerability when lenders like Genesis Capital started enforcing their call options, demanding immediate repayment.
• FTX Credit Line Spending: Alameda had reportedly spent billions from its line of credit with FTX. This highlights the interconnectedness and potential conflicts of interest between the two entities.

Hiding the Truth: ‘Alternative’ Spreadsheets

In a particularly damning revelation, Ellison confessed to creating “alternative” spreadsheets for Alameda’s lenders at SBF’s request. These spreadsheets intentionally concealed Alameda’s true financial liabilities with FTX, designed to present a healthier financial picture and prevent lenders from demanding full repayment. This act of financial misrepresentation is a key point of contention in the trial.

Emotional Toll: The Weight of Impending Doom

Ellison also described the immense pressure and anxiety she faced as Alameda’s CEO. She spoke of her constant worry about a potential “liquidity crush” and the devastating consequences of customers simultaneously withdrawing funds from FTX.

“Every day, I was worrying about the possibility of [loans] being called at the same time.”

This quote encapsulates the precariousness of the situation and the constant fear of a cascading financial crisis.

What’s Next?

Ellison’s cross-examination by Bankman-Fried’s defense team is set to begin on October 12th. This next phase of the trial promises to be intense, as the defense will likely attempt to challenge Ellison’s credibility and present a different narrative of events. The crypto world will be watching closely as more details emerge from this landmark trial.

Key Takeaways from Ellison’s Testimony

Ellison’s testimony provides a fascinating, albeit disturbing, glimpse into the inner workings of FTX and Alameda in the lead-up to their collapse. Here are some key takeaways:

• SBF’s Distracted Focus: Instead of solely focusing on the core issues at Alameda and FTX, SBF appeared preoccupied with external factors like regulatory actions against Binance and unrelated investments like Snapchat.
• Financial Mismanagement at Alameda: The reliance on open-term loans and the extensive use of FTX’s credit line point to significant financial mismanagement at Alameda Research.
• Deceptive Practices: The creation of “alternative” spreadsheets to mislead lenders is a serious allegation of financial deception.
• Pressure and Anxiety: Ellison’s testimony highlights the immense pressure and ethical dilemmas faced by individuals within FTX and Alameda as the situation deteriorated.

The trial continues to unfold, and with each day, more pieces of the puzzle surrounding the FTX collapse are revealed. Caroline Ellison’s testimony is undoubtedly a critical piece, offering a firsthand account of the anxieties and alleged misdeeds that preceded one of the most significant events in crypto history. Stay tuned for more updates as the trial progresses.