(Bloomberg) – Former Alameda Research CEO Caroline Ellison said she and FTX co-founder Sam Bankman-Fried knowingly misled lenders about how much the trading firm borrowed from the exchange. electronic money transactions.
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Ellison gave a public explanation for his actions for the first time during a December 19 plea hearing in Manhattan federal court. “I know that’s wrong,” she said, according to the transcript of the hearing.
Bankman-Fried, 30, is accused of orchestrating a multi-year scam in which he used billions of dollars in FTX customer funds for personal expenses and high-risk bets through via Alameda, the crypto exchange’s sister trader.
Ellison and FTX co-founder Gary Wang, who also appeared in the December 19 hearing, pleaded guilty to fraud and are cooperating with Manhattan federal prosecutors.
“Between 2019 and 2022, I know that Alameda was provided with access to a lending facility on FTX.com, the cryptocurrency exchange run by Mr. Bankman-Fried,” Ellison said, adding, “In practical terms, this agreement gives Alameda access to an unlimited line of credit with no margin requirements, no negative balances and no margin requirements on its liquidation protocols. FTX.com.”
“I understand that if Alameda’s FTX account has a substantial negative balance in any particular currency, it means that Alameda is borrowing money that FTX customers have deposited on the exchange,” Ellison said. Translate.”
She said that she and Bankman-Fried agreed to conceal the arrangement from lenders and produce false financial statements to conceal the amount Alameda borrowed.
Wang during the plea hearing said he was “directed” to make changes to the FTX platform’s code that he knew would give Alameda special privileges and that there were miscommunications. for customers and investors.
“I know what I did was wrong,” Wang said.
(Updated details from hearing transcript.)
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