In a jaw-dropping turn of events, the FTX trial in Manhattan Federal Court took an unexpected twist when Caroline Ellison, the former CEO of Alameda Research, laid bare astonishing claims of the crypto hedge fund's entanglement with international government officials.
Ellison, testifying under a cooperation agreement with the US government, left the jury stunned as she confessed to falsifying balance sheets, creating a facade that portrayed their crypto hedge fund as less risky than it truly was. Her intention was to conceal the fact that they had borrowed billions from FTX customers.
During her testimony, Ellison expressed remorse and regret, acknowledging that her actions were ethically wrong. She went on to reveal the constant dread that consumed her as FTX faced an impending collapse. By 2022, Alameda Research had amassed over $21 billion in mostly illiquid assets but had liabilities exceeding $14 billion.
Ellison disclosed that she and Sam Bankman-Fried, the founder of FTX, had predicted various market scenarios that could potentially spell doom for their crypto empire. At one point, she calculated a 100% probability of failure if the crypto market took a downturn during their ambitious venture investments. Despite this alarming prognosis, Bankman-Fried persisted and, in an attempt to repay loans, resorted to using customers' funds from FTX.
As their capital resources dwindled, Ellison recounted Bankman-Fried's futile attempts to secure investments from the Crown Prince of Saudi Arabia, Mohammed bin Salman Al Saud. She also alleged that Bankman-Fried took measures to prevent sensitive discussions from being traced back to him by enabling automatic message deletion in their company's encrypted messaging platform, Signal.
Furthermore, Ellison revealed that communication within the company was subjected to the "The New York Times Test," which meant that employees were instructed to share information they would be comfortable seeing as a headline in the newspaper.
However, the most shocking revelation came when Ellison testified about Bankman-Fried's bribery of Chinese government officials in an effort to unfreeze Alameda's trading accounts on OKX and Huobi exchanges, which collectively held over $1 billion in assets.
According to Ellison, these bribes were seen as a last resort after their legal negotiations with Chinese officials failed. They even tried to use trading accounts registered under the names of Thai prostitutes to unlock their funds.
When a trader at Alameda Research expressed her concerns about these bribery attempts, Bankman-Fried allegedly lashed out at her, using expletives. Throughout this revelation, Bankman-Fried remained silent, hand resting on his mouth, while Ellison calmly continued her testimony.
As the prosecution presented a final balance sheet into evidence, the courtroom was left in suspense. The trial's future remains uncertain, with Ellison expected to conclude her testimony this week. Whether or not Bankman-Fried will testify in his own defense remains to be seen. The FTX trial continues to captivate the world as these astounding allegations unravel.