Caroline Ellison’s Testimony Claims FTX Boss SBF Directed Her to Co-Mingle Customer Funds Since 2019

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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’s 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’s 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 ‘borrowing facility,’ according to Ellison, was FTX’s customer funds.

Caroline Ellison Details FTX’s Misconduct With Alameda and the Co-Mingling of Customer Funds Started From the Very Beginning

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

“From 2019 to 2022, I was aware that Alameda was provided access to a borrowing facility on, the cryptocurrency exchange run by Mr. Bankman-Fried. I understood that executives had implemented special settings on Alameda’s account that permitted Alameda to maintain negative balances in fiat currencies and cryptocurrencies,” Ellison’s testimony details. “In 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’s liquidation protocols,” the ex-Alameda CEO added.

Ellison’s account of the situation continued:

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.

Ellison Understood FTX Customer Funds Were Used to ‘Finance FTX’s Loans to Alameda,’ Ex-Alameda CEO Is ‘Truly Sorry’ for What She Did

Ellison was aware that many of Alameda’s investments were illiquid, and she said she fully agreed to borrow funds from FTX’s coffers. “While 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,” Ellison’s testimony explains. “I 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.”

Ellison further added:

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.

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

Caroline Ellison is a Stanford graduate who graduated in 2016 with a bachelor’s 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.

According to SBF’s 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’s stories, when he managed to do a media tour for a month before he was arrested 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’s business dealings. Speaking virtually at the New York Times’ Dealbook Summit with Andrew Ross Sorkin, SBF insisted he “didn’t knowingly co-mingle funds.”

As far as Alameda Research was concerned, SBF said:

I didn’t know the size of their position. I wasn’t running Alameda — I didn’t know exactly what was going on.

Ellison’s unsealed testimony completely contradicts SBF’s position during his media tour, and not only does she apologize, she explains a number of misdeeds she personally committed. “I am truly sorry for what I did,” Ellison concluded. “I 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’s investigation. I am here today to accept my responsibility for my actions by pleading guilty.” When the judge asked Ellison if she knew what she did was illegal, she replied “yes.”

Billionaire Bill Ackman’s Recent FTX Twitter Thread Slammed

Interestingly, billionaire Bill Ackman tweeted about SBF and cohorts the day prior on Dec. 22, and decided to describe the case as a business “failure.” “One that is “so frightening that they can’t acknowledge it, and they do stupid sh-t to avoid the embarrassment and the come down,” Ackman wrote. Ackman’s most recent FTX Twitter thread wasn’t 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’s testimony even notes that her special Alameda treatment and the co-mingling of customer funds began in 2019.

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


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