Things are looking even worse for the disgraced former CEO of the FTX crypto exchange Sam Bankman-Fried. Carline Ellison, the former CEO of Alameda Research, another crypto trading firm founded by SBF, testified in court that she was directed by Bankman-Fried to misuse the FTX customer funds.
According to news first leaked by CoinDesk, Alameda Research was responsible for suffering several losses, and to cover them, Bankman-Fried lent the firm half of FTX customer funds. It was also later made public that Alameda held a position valued at $5 billion in FTT, the native token of FTX. The report disclosed that Alameda’s investment foundation was also in FTT, not in FIAT currency or any other cryptocurrency.
When the news of such activities became public knowledge, market sentiment changed increasingly negative towards FTX which ultimately resulted in a liquidity crisis for both FTX and Alameda.
The first entity responsible for causing a chain reaction of selling FTT was the crypto exchange Binance, which sold all of its FTT holdings. Bankman-Fried and Ellison were blamed to be the primary culprits behind this misuse of funds activities that resulted in the crypto market seeing one of the worst crashes in its history.
Testifying in the court about what transpired behind the scenes, Ellison admitted to fraud during her time at Alameda. She pointed the blame towards Bankman-Fried as the person who encouraged her to misuse the customer’s funds of FTX. She claimed that SBF “set up the systems”, leading to Alameda taking roughly $14 billion from the exchange.
According to her, Alameda took several billions of dollars from FTX customers and used it for investments. She would also send the balance sheets that make Alameda look less risky than it was. The former FTX CEO looked from the sidelines as Ellison put all the blame on his shoulders.
SBF is also blamed for misusing the customer’s funds to improve his lifestyle, buying expensive properties, and making donations to political campaigns.
On October 5th, one of the co-founders of FTX, Gary Wang, admitted that he, along with Ellison and former engineering director Nishad Singh committed these crimes. During his testimony, lawyers representing SBF tried to shift some of the blame for the exchange’s problems onto Ellison.
They questioned Wang about her role in this matter. They further argued that Ellison didn’t follow Bankman-Fried’s request to protect Alameda’s investments with a financial safety measure called a hedge.
So far, SBF has pleaded not guilty to all the charges made against him. It will be interesting to see whether SBF will be able to pull himself out of these allegations or whether he will face the consequences of his alleged actions.
