A 75-minute secretly recorded audio clip of Caroline Ellison has revealed the exact moment 15 former Alameda Research staff discovered the hedge fund was “borrowing” consumer funds from FTX.
The full-length recording obtained by Cointelegraph gives contemporary insights into the palpable stress Ellison and Alameda staff felt in the lead-up to FTX’s collapse.
“Alameda was kind of borrowing a bunch of money via open-term loans and using that to make various illiquid investments. So like a bunch of FTX and FTX US equity […] Most of Alameda’s loans got called in in order to meet those recalls,” Ellison defined throughout an all-hands assembly in Hong Kong on Nov. 9, 2022.
“We ended up borrowing a bunch of funds from FTX, which led to FTX having a shortfall in user funds.”
“[FTX] basically always allowed Alameda to borrow users’ funds,” she added, talking to the 15 or so staff within the assembly.
Select segments of the audio recording of the assembly had been additionally performed earlier than the court docket on the eighth day of Sam Bankman-Fried’s legal trial on Oct. 12, which was a part of witness testimony from Christian Drappi, a former software program engineer at Alameda.
Drappi’s look on the witness stand got here instantly following nearly three days of Ellison’s testimony. It is known that earlier than the assembly, Drappi and lots of different Alameda staff had no concept that the hedge fund had allegedly been utilizing FTX buyer deposits to prop up its buying and selling exercise.
In the recording, Drappi can also be overheard asking Ellison when she grew to become conscious that Alameda was misusing FTX consumer deposits and who else on the firm had recognized about it.
Initially, Ellison shied away from answering, however Drappi pressed once more:
“I’m sure this wasn’t, like, a YOLO thing, right?”
According to court docket reporting from the trial, the playback of this audio led to one of many extra humorous moments in court docket, the place Drappi needed to clarify the time period “YOLO” to everybody in attendance, saying that he wished Ellison to verify that using FTX deposits hadn’t simply been a “spontaneous” resolution.
In his testimony, Drappi additionally described Ellison’s conduct on the assembly as “sunken” and didn’t show a lot in the best way of confidence to Alameda staff. He stated he was “stunned” to study about the extent of the connection between FTX and Alameda and stop the subsequent day.
Speaking to Cointelegraph, Alameda Research engineer Aditya Baradwaj, who was additionally current on the assembly, stated the room was “extremely tense,” with Ellison surfacing a wealth of latest data that had “never been discussed internally” — including the later-abandoned acquisition of FTX by its then-largest competitor Binance.
“It became pretty clear that there was no future for the company and that we all had to leave. And we did that right after,” stated Baradwaj.
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