In a shocking turn of events, a secretly recorded 75-minute audio clip has come to light, exposing the exact moment when 15 former staff members of Alameda Research discovered the hedge fund’s alleged misappropriation of user funds from FTX. The full-length recording provides fresh insights into the tension that enveloped Caroline Ellison and her team at Alameda in the lead-up to FTX’s collapse.
The revelation
During an all-hands meeting in Hong Kong on November 9, 2022, Caroline Ellison, a central figure at Alameda Research, disclosed unsettling information to her staff. She revealed that Alameda had been borrowing substantial sums of money through open-term loans and using these funds for various illiquid investments, including a significant stake in FTX and FTX US equity.
Ellison went on to disclose that most of Alameda’s loans had been called in, primarily to meet the recalls initiated by FTX. She confessed, “We ended up borrowing a bunch of funds from FTX, which led to FTX having a shortfall in user funds.” The gravity of the situation was underscored as she disclosed that FTX had consistently allowed Alameda to borrow users’ funds.
Testimony in court
Select segments of this explosive audio recording were played in court on the eighth day of the criminal trial of Sam Bankman-Fried, the founder of FTX. The audio clips were presented as part of witness testimony by Christian Drappi, a former software engineer at Alameda Research. Drappi’s testimony followed three days of Ellison’s own account of events, shedding further light on the scandal.
In the recorded meeting, Drappi is heard questioning Ellison about when she became aware of Alameda’s alleged misuse of FTX user deposits and who else within the company had knowledge of this transgression.
Initially evasive, Ellison was pressed by Drappi to clarify whether these actions had been impulsive or part of a premeditated plan. The term “YOLO” had to be explained to those present, as Drappi sought confirmation that the misuse of FTX deposits had not been a spontaneous decision.
During his testimony, Drappi characterized Ellison’s demeanor in the meeting as “sunken” and lacking confidence. He expressed his own astonishment at the extent of the relationship between FTX and Alameda and revealed that he resigned from the company the very next day after learning about these shocking revelations.
The repercussions of this revelation could be far-reaching. It raises serious questions about the ethical and legal conduct of both Alameda Research and FTX. The apparent misuse of user funds, compounded by the complicity of FTX in facilitating these actions, has left the cryptocurrency community in shock.
As the details of this audio recording continue to send shockwaves through the industry, it remains to be seen how both Alameda Research and FTX will navigate the fallout. Legal actions, regulatory investigations, and potential financial penalties could loom large on the horizon.
