Weeks and months before the collapse of cryptocurrency exchange FTX, former CEO Sam Bankman-Fried was “paranoid” about Alameda, buying shares in Snapchat, raising capital from Saudi royalty, and prompting regulators to crack down on rival cryptocurrency exchange Binance.
That’s what former Alameda Research CEO Carolyn Ellison said in her personal remarks about FTX and Alameda, which prosecutors presented on the second day of testimony in New York.
During the trial, Ellison told jurors that the collapse in the Terra ecosystem in May 2022 was significant enough to make Bankman-Fried consider closing Alameda and seeking to raise $1 billion in capital from the Saudi prince, known for his investments in blockchain games. Through the Saudi sovereign wealth fund.
Another priority for Bankman Fried a year ago was to “get regulators to crack down” on cryptocurrency exchange Binance, a move aimed at increasing FTX’s market share, according to Ellison. It did not provide any details on how Bankman Fried plans to do this.
Another courtroom sketch by Caroline Ellison.
-Ariel Givner, Esq. (@givner ariel) October 11, 2023
She said Bankman Fried was also seeking more money from cryptocurrency bank BlockFi, which has already loaned Alameda more than $660 million. His other main interests included trading Japanese government bonds, buying shares of Snap Inc (SNAP), and “making Willie happy.”
Although the list does not specify who Willie was, it is likely that the name was a reference to Bankman Fried’s mentor William MacAskill.
According to Ellison, Bankman-Fried blamed it for Alameda’s problems and poor hedging. During the trial, Ellison admitted that a better hedging strategy could have helped Alameda weather the crypto winter, but noted that the company also had large open-term loans and had spent billions from its credit line with FTX.
Open-term loans have no maturity date, which means the borrower has the option to prepay, while the lender has the option to call. In June, lenders like Genesis Capital began enforcing their put option, requiring the Alameda company to repay millions of dollars. At the direction of Bankman-Fried, Ellison paid off a portion of Alameda’s debts with funds from FTX clients. As of September 2022, Alameda’s liabilities with FTX were $13.7 billion, while its open-term loans were $1.3 billion, it said.
In addition, and also at Bankman-Fried’s request, Ellison also created “alternative” spreadsheets for Alameda’s lenders, to hide the company’s financial obligations with FTX to make it “look better” and to prevent the lenders from demanding full repayment.
Ellison also revealed moments of emotional turmoil. Speaking calmly and firmly during the trial, she expressed concern about the possibility of customers withdrawing their money from FTX amid a “liquidity collapse” in Alameda.
“Every day, I worried about the possibility of this happening [loans] It is called at the same time.”
Questioning of Ellison by Bankman-Fried’s defense will begin on October 12.
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