A secretly recorded 75-minute audio clip by Carolyn Ellison revealed the exact moment 15 former Alameda Research employees discovered that the hedge fund was “borrowing” users’ money from FTX.
The full recording, obtained by Cointelegraph, provides new insights into the apparent tension felt by Ellison and Alameda employees in the lead-up to FTX’s collapse.
“Alameda was borrowing a bunch of money through open-end loans and using it to make various illiquid investments. So like a bunch of US FTX and FTX stocks […] “Most of Alameda’s loans were called in order to meet those recoveries,” Ellison explained during an all-hands meeting in Hong Kong on November 9, 2022.
“We ended up borrowing a bunch of money from FTX, which resulted in FTX being short on user funds.”
“[FTX] “I have always allowed Alameda to borrow users’ money,” she added, speaking to the 15 or so employees at the meeting.
Select clips from the audio recording of the meeting were also played to the court on the eighth day of Sam Bankman-Fried’s criminal trial on October 12, which was part of witness testimony from Christian Drape, a former Alameda software engineer.
Darabi’s appearance on the witness stand came immediately after nearly three days of Ellison’s testimony. It is understood that prior to the meeting, Drappi and several other Alameda employees had no idea that the hedge fund was using FTX client deposits to support its trading activity.
In the recording, Darabi is also heard asking Ellison when she realized FTX users’ deposits were being misused by Alameda, and who else at the company knew about it.
At first, Ellison backed away from the answer, but Daraby pressed again:
“I’m sure this wasn’t a YOLO kind of thing, right?”
Related: Caroline Ellison claims Changpeng Zhao’s tweet “contributed” to FTX’s collapse
According to the court report from the trial, playing this audio led to one of the most humorous moments in court, as Darabi had to explain the term “YOLO” to everyone present, saying that he wanted Ellison to confirm that using FTX deposits was not just a “spontaneous” decision. .
In his testimony, Drape also described Ellison’s behavior at the meeting as “overwhelmed” and did not show much confidence to Alameda staff. He said he was “stunned” when he learned the extent of the relationship between FTX and Alameda, and resigned the next day.
Speaking to Cointelegraph, Aditya Bharadwaj, a research engineer at Alameda, who was also present at the meeting, said the room was “very tense,” as Ellison revealed a wealth of new information that had “never been discussed internally” — including the process of… The acquisition of FTX was later abandoned by its then largest competitor Binance.
“It became quite clear that there was no future for the company and we all had to leave. We did it right after that,” Bharadwaj said.
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