Caroline Ellison, former CEO of Alameda Research, testified as part of her guilty plea that she was aware that FTX funds had been made available for the venture capital firm’s investments.
In a transcript of his guilty plea in the Southern District of New York released on December 23, Ellison acknowledged the financial ties between FTX and Alameda, which are at the center of the prosecutors’ case against Sam Bankman-Fried, former CEO of FTX. According to the former CEO of Alameda, Alameda had access to a “credit line” through FTX from 2019 to 2022.
“I understood that FTX executives had implemented special settings in Alameda’s FTX.com account that allowed Alameda to maintain negative balances in various fiat and cryptocurrencies,” Ellison said. “In practical terms, this agreement allowed Alameda to access an unlimited line of credit without being required to post collateral, without having to pay interest on negative balances, and without being subject to margin calls or FTX.com settlement protocols. “. And he added:
“If Alameda’s FTX accounts had significant negative balances in a particular currency, it meant that Alameda was borrowing funds that FTX clients had deposited with the exchange.”
OK-on #FTX / Alameda, here now the unsealed guilty plea transcript of Caroline Ellison – it was held in secret, and not docketed until today, once Bankman-Fried was freed on $250 mln bond. Thread then stories on https://t.co/3AcCBJNU41 and pic.twitter.com/Ptd0L1u9oL
— Inner City Press (@innercitypress) December 23, 2022
Ellison’s statement included allegations that Bankman-Fried and other FTX executives had borrowed funds from Alameda, and used the FTX funds to pay off “loans worth several billion dollars.” She said most FTX clients would have expected their funds to be used for this purpose, and both she and Bankman-Fried signed “materially misleading financial statements” for the Alameda lenders, knowing it was illegal.
“I’m so sorry for what I did” Ellison said. “I knew it was wrong.”
Ellison’s plea agreement, made public on Dec. 21, largely cleared the former Alameda CEO of many of the charges Bankman-Fried currently faces, including wire fraud and securities fraud. She can still be prosecuted for tax violations, but the agreement sets bail at $250,000 on the condition that she hand over all her travel documents.
US authorities extradited Bankman-Fried from the Bahamas on December 21, after more than a week in the country’s Fox Hill prison. Prosecutors allowed the former FTX CEO to be placed under house arrest with an anklet following a $250 million bail posted by his parents. He is expected to appear in court again on January 5.
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