…
Caroline Ellison: In court, the former CEO of FTX’s sister firm, Alameda, admitted that she had lied to lenders about their financial information.
Ellison agreed with the previous FTX CEO to give “materially misleading financial statements” to Alameda’s lenders.
The news
The transcript of Caroline Ellison’s trial testimony was made public three days after she spoke in court on December 19, although SBF was not released on a $250 million bond until then.
The former CEO of Alameda testified to US District Court Judge Ronnie Abrams, saying, “I am truly sorry for what I did – I knew that it was wrong.”
“Did you also know that it was illegal?” the court asked her to clarify.
“Yes,” Ellison answered.
Federal charges
The other co-founder of FTX, Gary Wang, and Caroline Ellison admitted last week to participation in the frauds that led to the company’s downfall.
According to attorneys for the Southern District of New York on Wednesday, the two have been charged.
The Securities and Exchange Commission charged them with participating part in a plan to defraud equity investors.
A change had been made, according to the Commodities Futures Trading Commission (CFTC), to its fraud complaint.
According to US Attorney Damian Williams, Ellison and Wang filed guilty pleas.
Williams also expressed gratitude to the Bahamas, the US Embassy there, and the Justice Department’s Office of International Affairsfor their help.
Gary Wang and Caroline Ellison are cooperating with the Southern District of New York.
Before Sam Bankman-Fried had been on his way from the Bahamas to the US, they didn’t reveal their plea agreements.
Read also: Sam Bankman-Fried on $250 million bail, ordered to live with parents
The financial statements
According to Caroline Ellison, the misleading financial statements came from “quarterly balance sheets that concealed the extent of Alameda’s borrowing and the billions of dollars in loans that Alameda had made.”
“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,” said Ellison.
The following reported about the transcript:
- New York Times
- Reuters
- Bloomberg
A section of the transcript was tweeted by Matthew Russell Lee of Inner City Press.
Early reports
According to reports that surfaced last week, the workers of FTX and Alameda were either aware of or oblivious of what was occurring between the two companies.
The uncertainty generated a lot of discussion before to Ellison and Wang admitted guilt to their charges.
Caroline Ellison’s comments, however, supported rumors that FTX had treated Alameda differently.
Alameda was permitted to withdraw funds from its sister company.
Ellison said:
“I understood that FTX executives had implemented special settings on Alameda’s FTX.com account that permitted Alameda to maintain negative balances in various fiat currencies and crypto currencies.”
“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 FTX.com’s liquidation protocols.”
She claimed that the former CEO of Alameda and others were aware of the company’s enormous debt and what it implied.
“I understood that if Alameda’s FTX accounts had significantly negative balances in a particular currency,” she continued.
“It meant that Alameda was borrowing funds that FTX’s customers deposited onto the exchange.”
Read also: Google review system pressures employees
SBF
Caroline Ellison claims that Sam Bankman-Fried and other executives borrowed money from Alameda while taking part in a number of “large illiquid venture investments.”
She said that in order to repay the loans, she and others had agreed to borrow from FTX in the billions of dollars.
“I understood that FTX would need to use customer funds to finance its loans to Alameda,” Ellison shared.
“Most FTX customers did not expect that FTX would lend out their digital asset holdings and fiat currency deposits to Alameda in this fashion.”
Caroline Ellison also addressed the victims of the FTX collapse, saying:
“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.”
References:
Caroline Ellison ‘knew that it was wrong,’ implicates Sam Bankman-Fried
Caroline Ellison, Gary Wang plead guilty, cooperating in FTX investigation
SEC says Ellison, Wang ‘knew or were reckless in not knowing’ about FTX fraud
