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

Caroline Ellison wasn’t doing job main Alameda Analysis in 2022, and he or she didn’t disguise it. Items of her private notes shared as proof by prosecutors on Sam Bankman-Fried’s trial revealed particulars concerning the buying and selling agency’s struggles and its CEO’s want to resign weeks and months earlier than the collapse of FTX.

Ellison spent over ten hours testifying throughout Bankman-Fried’s trial this week, notably coming into by way of the entrance doorways of the federal court docket in Manhattan, joined by her attorneys. In line with Ellison, she had not seen Bankman-Fried for the reason that crypto empire failed in November final 12 months. However their communication eroded even months earlier than.

In April 2022, their romantic relationship got here to an finish, and Caroline began avoiding conferences with Bankman-Fried, though they nonetheless lived in the identical luxurious condominium within the Bahamas. Alameda’s rising liabilities with FTX and the breakup made her think about leaving Alameda.

“I really feel hyperlink neither Trabucco nor I’ve been doing an excellent job of pushing on stuff,” she wrote within the doc to Bankman-Fried, shared as proof throughout her cross-examination by his protection counsel.

Yet one more Caroline Ellison courtroom sketch.

This one that includes SBF himself! https://t.co/q3O6xqxEhl pic.twitter.com/cQJbj5V1H7

— Ariel Givner, Esq. (@GivnerAriel) October 11, 2023

Bankman-Fried requested her to remain, saying that her departure may create rumors about Alameda’s monetary well being, thus harming FTX credibility. Ellison remained as CEO.

Ellison joined Alameda as a dealer in 2018. By 2020, she was dealing with a lot of the firm’s operations, whereas Bankman-Fried was centered on his newly launched crypto alternate FTX. In August 2021, she turned co-CEO alongside Sam Trabucco, who stepped down a number of months later, leaving her in control of the corporate. In August 2022, Trabucco formally resigned as co-CEO.

Ellison was towards creating FTX, she revealed. “I did not consider myself as bold earlier than I began at Alameda, however I imagine I turned extra bold” below Bankman-Fried’s incentive, she mentioned.

As CEO, Elisson was in control 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, main Alameda’s lenders to demand compensation on loans.

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

As lenders demanded compensation of loans and Alameda’s stability sheets, Bankman-Fried steered Ellison use “different means” for presenting the corporate’s financials. Within the following months, Ellison would create many further variations of a stability sheet to deceive collectors.

Early in November, an alternate model of Alameda’s stability sheet was leaked. On the time, Ellison was on trip in Japan, however she needed to journey to FTX Hong Kong’s workplace to take care of the corporate’s disaster.

Whereas the stability sheet knowledge did not mirror the corporate’s actuality, it was sufficient to unfold rumors and set off a financial institution run on FTX a number of days later, exposing an $8 billion hole between the businesses.

Cooperating with the Division of Justice since December, Ellison will quickly obtain her sentence concerning the seven counts of fraud and conspiracy to commit fraud she was charged with.

Caroline Ellison wasn’t doing job main Alameda Analysis in 2022, and he or she didn’t disguise it. Items of her private notes shared as proof by prosecutors on Sam Bankman-Fried’s trial revealed particulars concerning the buying and selling agency’s struggles and its CEO’s want to resign weeks and months earlier than the collapse of FTX. 

Journal: Blockchain detectives — Mt. Gox collapse saw birth of Chainalysis