Caroline Ellison wanted to step down but feared a bank run on FTX


Caroline Ellison wasn’t doing a good job main Alameda Research in 2022, and she or he didn’t disguise it. Excerpts from her private notes shared as proof by prosecutors in Sam Bankman-Fried’s trial revealed particulars in regards to the buying and selling agency’s struggles and its CEO’s want to resign weeks and months earlier than FTX collapsed.

Ellison spent over 10 hours testifying throughout Bankman-Fried’s trial this previous week, notably getting into by means of the entrance doorways of the United States District Court for the Southern District of New York in Manhattan, joined by her attorneys. Ellison mentioned she had not seen Bankman-Fried for the reason that crypto empire failed in November 2022, but their communication had eroded months earlier than.

In April 2022, their romantic relationship ended, and Caroline began avoiding conferences with Bankman-Fried despite the fact that they nonetheless lived in the identical luxurious condo within the Bahamas. Alameda’s rising liabilities with FTX and the breakup with Bankman-Fried made her contemplate leaving the corporate altogether.

“I feel like neither [Sam] Trabucco nor I have been doing a great job of pushing on stuff,” she wrote within the doc to Bankman-Fried, which was shared as proof throughout her cross-examination by the previous FTX CEO’s protection counsel.

Bankman-Fried requested her to keep on, saying that her departure might create rumors about Alameda’s monetary well being, thus harming FTX’s credibility, so Ellison remained CEO.

Ellison joined Alameda as a dealer in 2018. By 2020, she dealt with many of the firm’s operations, whereas Bankman-Fried targeted on his newly launched crypto alternate, FTX. In August 2021, she grew to become co-CEO alongside Sam Trabucco, who stepped down a few months later, leaving her in command of the corporate. In August 2022, Trabucco formally resigned as co-CEO.

Ellison was towards creating FTX, she revealed. “I didn’t think of myself as ambitious before I started at Alameda, but I believe I became more ambitious” beneath Bankman-Fried’s incentive, she mentioned.

As CEO, Ellison was in command of dealing with Alameda’s crypto lenders. In mid-2022, after the Terra ecosystem failed, the corporate’s open-term loans stood at $1.3 billion. The market downturn drained liquidity from crypto belongings, prompting Alameda’s lenders to demand mortgage repayments.

According to Ellison, Bankman-Fried instructed her to preserve repaying collectors by way of Alameda’s line of credit score with FTX. In different phrases, Alameda would use FTX’s buyer belongings to repay crypto lenders. At the time, its line of credit score with the alternate stood at $13 billion.

As lenders demanded mortgage repayments and Alameda’s steadiness sheets, Bankman-Fried urged Ellison use “alternative means” for presenting the corporate’s financials. In the next months, Ellison would create many extra variations of a steadiness sheet to deceive collectors.

Early in November 2022, another model of Alameda’s steadiness sheet was leaked. Ellison was on trip in Japan on the time, but she had to journey to FTX Hong Kong’s workplace to take care of the corporate’s disaster.

While the steadiness sheet knowledge didn’t mirror the corporate’s actuality, it was sufficient to unfold rumors and set off a bank run on FTX a few days later, exposing an $8 billion hole between the businesses.

Having cooperated with the U.S. Department of Justice since December 2022, Ellison will quickly obtain her sentence relating to the seven counts of fraud and conspiracy to commit fraud she was charged with.

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