In a revelatory courtroom testimony, Caroline Ellison, the erstwhile CEO of Alameda Research, unveiled a twisted web of financial impropriety, implicating herself and her ex-beau, Sam Bankman-Fried, within the operations of cryptocurrency exchange FTX. The unsettling confessions unfolded on a tense Wednesday and took the financial world by the tempest, drawing ire and astonishment in equal measure.
Evidently burdened by her dubious past, Ellison unravelled details of covert activities involving staggering amounts of illicitly appropriated FTX customer funds. Moreover, her admission revealed a shady connection between FTX and the Chinese government, with Ellison detailing a brazen $100 million bribe to facilitate the release of a notably larger cache of assets previously frozen amidst a money laundering probe.
However, the attempted bribery wasn’t FTX’s first strategy to reclaim the staggering $1 billion seized by the Chinese government. Initially, they sought legal avenues; as Ellison noted, “We tried to hire a lawyer there. It didn’t work. We used other people’s accounts. Ryan Salame told me. But it didn’t work either.” Consequently, desperation led to unethical measures, with the cryptocurrency exchange aligning with two Chinese nationals, among them David Ma, who claimed to possess the wherewithal to retrieve their frozen funds.
Ellison recalled a pivotal moment: “Sam said Ma had found a way to get our accounts unfrozen if we just sent to these crypto addresses $100 million.” Tantalizing as it was, the decision to traverse this illicit path wasn’t unanimous among FTX’s executive team. However, Bankman-Fried’s determination to utilize Ma’s proposal overpowered any lingering ethical reservations.
Beyond the bribery revelation, Ellison painted a picture of deliberate image manipulation by Bankman-Fried, including scrupulous investments in media entities such as Semafor and potential ventures into Vox and Forbes. Additionally, orchestrated meetings with famed author Michael Lewis and the meticulous crafting of a public image marked by his uncombed hair and modest vehicle choice further underscored the clandestine efforts to manage perceptions both in and outside the enterprise.
Ellison’s admission also highlighted on precarious financial practices within Alameda. The dark shadows of a financial abyss in June 2022 came into the limelight when Genesis, an institutional crypto trading firm, recalled a $400 million loan and requested an updated view of Alameda’s balance sheet. Significantly, Ellison confided that Bankman-Fried, uneasy about unveiling the truth of the $9.9 billion shortfall due to unauthorized lending from FTX customer funds, sought to manipulate their financial presentation.
“He told me to come up with alternative ways to present the information,” Ellison explained. The resultant subterfuge saw the creation of seven varied versions of their balance sheet, with Bankman-Fried selecting one that artfully obscured their perilous fiscal position.
In the courtroom, the atmosphere remained thick with disbelief as Ellison, her voice steady, her demeanor resolute, gave her damning account, implicating not just herself and Bankman-Fried, but tarnishing the reputation of the entities they once led.
