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Former Alameda CEO Testifies Against Sam Bankman-Fried in Fraud Trial

  • Posted on October 11, 2023
  • Business
  • By Arijit Dutta
  • 486 Views

 In a pivotal moment during the ongoing fraud trial, Caroline Ellison, the former CEO of Alameda Research, has accused her ex-boss and boyfriend, Sam Bankman-Fried, co-founder of FTX, of orchestrating a multi-billion-dollar financial scandal. Ellison took the witness stand, asserting that Bankman-Fried was the mastermind behind the misappropriation of customer funds and the ultimate downfall of the cryptocurrency platform.

Former Alameda CEO Testifies Against Sam Bankman-Fried in Fraud Trial Image Source -www.npr.org

 In a pivotal moment during the ongoing fraud trial, Caroline Ellison, the former CEO of Alameda Research, has accused her ex-boss and boyfriend, Sam Bankman-Fried, co-founder of FTX, of orchestrating a multi-billion-dollar financial scandal. Ellison took the witness stand, asserting that Bankman-Fried was the mastermind behind the misappropriation of customer funds and the ultimate downfall of the cryptocurrency platform.

She emphatically pointed towards Bankman-Fried in the courtroom, affirming, "He directed me to commit these crimes." The trial, unfolding in a federal court in New York, has drawn significant attention, as Ellison's cooperation with the government positions her as a key figure with crucial insights into the alleged diversion of FTX customer funds.

Ellison, aged 28, described her relationship with Bankman-Fried, revealing that they initially met at Jane Street Capital and later began dating sporadically after she joined Alameda. She painted Bankman-Fried as a politically driven individual who aspired to leverage his wealth and influence. In a private conversation, he even mentioned his ambition of becoming the U.S. President one day, albeit with a mere 5% chance.

During her testimony, Ellison detailed Bankman-Fried's involvement in transferring over $14 billion of FTX customer funds to Alameda, disregarding concerns about auditors and inflating Alameda's balance sheet to secure loans. Alameda's financial woes stemmed from relying on FTX's line of credit, which was used for real estate, political contributions, and trading losses, accumulating to an $8 billion deficit.

Prosecutor Danielle Sassoon inquired about the defendant's role in using FTX customer money for Alameda, to which Ellison responded, "He set up a system that allowed Alameda to borrow from FTX." She further disclosed that Alameda had borrowed substantial amounts from FTX customer funds, mainly for trading purposes.

As Ellison's testimony unfolded, it became evident that Alameda initially secured funds from acquaintances through loans, but these investors withdrew their investments due to Alameda's poor performance. Bankman-Fried's strategy was to expand Alameda's access to loans, and they eventually created their crypto token, FTT, to bolster their balance sheet. This move was further aimed at attracting third-party lenders.

Also Read: ED Cracks Down On Alleged Money Laundering In Vivo Mobiles; Lava International MD Arrested

Despite initial reluctance to include FTT holdings in the balance sheet, Ellison stated that she did so as per Bankman-Fried's directive, as he believed it would help secure more loans. The former Alameda CEO disclosed her unease about the mounting loans, with Alameda owing $5 billion to Bankman-Fried and other FTX insiders by mid-2022, which included investments in FTX, a bitcoin mining firm, and an AI company.

Bankman-Fried's directives to Alameda to borrow as much money as possible from various sources, despite the associated risks, heightened Ellison's concerns. Her testimony has provided a window into the complex financial operations and relationships at the heart of the FTX cryptocurrency platform.

The trial's progress raises questions about ethics and transparency within the cryptocurrency and financial technology industry, making it a significant topic in the business world.

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Arijit Dutta

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