Day 5 of Sam Bankman-Fried Trial: Witness Caroline Ellison Reveals Fraudulent Schemes

Caroline Ellison

The trial of former FTX CEO Sam Bankman-Fried continued today (10/10) with the appearance of a key witness, Caroline Ellison, the former CEO of the investment fund Alameda Research. Caroline Ellison made statements and provided crucial evidence related to fraudulent and deceptive schemes at FTX-Alameda. Here are the key points from Ms. Ellison’s testimony in the trial:

Personal Relationship with Sam Bankman-Fried

Caroline Ellison revealed that she and Sam Bankman-Fried had previously worked together at Jane Street, a prominent investment fund on Wall Street, and they had even dated. However, she described their relationship in a work environment as “unprofessional.”

Criminal Acts at FTX-Alameda

Caroline Ellison admitted that during her time at Alameda, the investment fund had engaged in various fraudulent and deceptive activities. She stated that all these actions had been carried out under the direction of Sam Bankman-Fried. Alameda had withdrawn billions of dollars in assets from FTX users and then used these funds for investment purposes.

Deposits into Alameda’s Accounts

Caroline Ellison revealed that FTX users had deposited fiat money into Alameda Research’s accounts because the exchange couldn’t open U.S. bank accounts. The fund received approximately $10 to $20 billion from this source and used the funds for investments, debt repayment, and stablecoin issuance.

Relationship Between FTX and Binance

Caroline Ellison mentioned that Binance had previously held a significant amount of FTX shares following an investment deal in 2019. However, Sam Bankman-Fried decided to buy back all these shares to end the relationship with Binance. The value of these shares had increased to $2 billion at that time.

FTT Token and “Sam Coins”

Caroline Ellison disclosed that Alameda Research had received 60-70% of the total supply of FTX’s native FTT token without spending any money. Sam Bankman-Fried had instructed Alameda to buy more when the token’s price dropped below $1, but she felt uncomfortable when asked to carry out these trades.

Caroline Ellison also mentioned other “Sam Coins” such as Serum (SRM), Maps.me (MAPS), Oxegen (OXY), and Solana (SOL). All of these were used to inflate the balance sheet value of Alameda Research and serve as collateral for loans.

Sam Bankman-Fried’s Liquidity Crisis

Ms. Ellison testified about Sam Bankman-Fried’s “liquidity crisis” and his insistence on borrowing as much money as possible from various sources. However, she warned that Alameda Research was heavily in debt and might not be able to repay all of the fund’s loans, even after using FTX user assets.

The trial is expected to continue with further questioning of Caroline Ellison on October 11, 2023, covering various other issues, including investments in the AI company Anthropic.

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