Caroline Ellison Implicates Sam Bankman-Fried

The former chief executive of Alameda Research, Caroline Ellison told the judge that she had agreed with Sam Bankman-Fried to provide Alameda’s lenders with financial statements that were materially misleading.

A transcript of the courtroom allocution of the former CEO of the now-collapsed trading firm had been delivered on December 19th.

However, it had remained sealed until the disgraced ex-CEO of FTX had been released three days later for a $250 million bond.

Ellison admits to wrongdoing

Speaking to Ronnie Abrams, the US District Court judge who has now recused herself from the case, Ellison admitted that she knew what she had done was wrong and she was sorry for it.

The court questioned her whether she was aware that doing so was illegal and she admitted that she knew.

Last week, Ellison pled guilty to federal charges, along with Gary Wang, the co-founder of FTX, in the role they had played in the fraud that resulted in the collapse of the FTX empire.

The two have agreed to cooperate with the Southern District of New York. News regarding their plea agreements had been kept under wraps until Sam Bankman-Fried had been on his way from the Bahamas to the US.

The details

Ellison elaborated that the misleading financial statements that they had presented were the quarterly balance sheets that did not provide a complete picture of Alameda’s borrowing.

Likewise, they did not provide details about the loans that Alameda had made, which were worth millions of dollars.

She said that she had also agreed with SBF and others to refrain from publicly disclosing the relationship between FTX and Alameda and the latter’s credit arrangement.

The said transcript had been reported on and reviewed separately by Bloomberg, Reuters, and the New York Times.

Matthew Russell Lee also published some portions of it on Twitter.

The confirmation

The statement of Alameda’s CEO confirms reports that FTX had given special treatment to Alameda, as it had been allowed to withdraw money free from the former.

Ellison further asserted that she had been aware of FTX executives implementing special settings on Alameda’s account on the exchange.

This allowed the trading firm to keep its balance negative in different cryptocurrencies and fiat currencies.

She stated that it allowed Alameda to enjoy an unlimited line of credit and it did not have to have any collateral. Plus, the negative balances did not require any interest.

Alameda was also not subject to margin calls, or any of the liquidation protocols that were implemented on FTX.

She further admitted that she was aware of when the company was overleveraged and the implications of such a situation.

She said that she was aware that if there was a significant negative balance in Alameda’s account on FTX in a specific currency, it mean that the trading company was borrowing the funds of FTX’s customers.

As for SBF, she said that he and other executives had been taking loans from Alameda, which had made a number of illiquid venture investments.

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