During day six of the trial, the defense attorney, Mark Cohen, questioned Caroline Ellison, the former CEO of Alameda Research. She had previously claimed that Sam Bankman-Fried influenced her to make deceptive social media posts and instructed her to use stolen customer cryptocurrency for loan repayments.
The witness’s testimony revealed the troubling events leading to FTX’s problems, including questionable practices and hidden information.
According to Caroline Ellison, Sam Bankman-Fried allegedly sent false financial records to lenders and hid the true value of FTT. Furthermore, FTX and Alameda provided loans of around $5 billion to select employees for risky investments and political contributions.
There are also allegations of potential bribes paid to Chinese officials to release about $1 billion, possibly belonging to FTX customers. These allegations suggest violations of the Foreign Corrupt Practices Act (FCPA), involving individuals like SBF and Sam Trabucco, who was Alameda’s co-CEO at the time.
The FCPA laws in the U.S. make it illegal for people and organizations to engage in corrupt activities, such as bribery, with foreign officials.
Reports indicate that Constance Wang, David Ma, and another person known as “Handi” played a role in these alleged bribes. As per these reports, David Ma instructed FTX and Alameda to transfer $100 million in cryptocurrencies to wallets owned by Thai escorts.
OK – here from today's (now yesterday's) court exhibits in US v. SBF is the reference to the bribe to Chinese officials, also involving Sam Trabucco, as "the thing" – Inner City Press coverage, SDNY & UN, will continue : ) Support: https://t.co/u4oPsv17a8 pic.twitter.com/BMvHihOKuN
— Inner City Press (@innercitypress) October 12, 2023
Caroline Ellison Informed Alameda Staff that FTX Used Customer Funds
During the seventh day of SBF’s trial, the defense lawyer, Mark Cohen, continued cross-examining Caroline Ellison. The judge decided not to consider a $1 billion stake in the AI company Anthropic.
Caroline Ellison, the former CEO of Alameda Research, expressed doubts about FTX’s business decisions and Sam Bankman-Fried’s strong preference for Solana. She also had concerns about investing in TerraUSD (UST), which led to significant losses for both FTX and Alameda when UST’s value dropped in mid-2022.
Ellison took on more responsibilities at SBF’s hedge fund when Sam Trabucco, Alameda’s co-CEO, resigned. She believed it was better to have one CEO, even though SBF proposed Ben Xie as Trabucco’s replacement.
Caroline revealed that SBF had the final say on decisions, even though she and Trabucco were frequently consulted on trading matters.
Coding and development were handled by Gary Wang and Nishad Singh, former CTO and lead engineer, respectively, for Alameda and FTX.
Alameda’s risk management was inadequate, and they experienced at least one hacking incident. They also stored wallet keys without a formal structure, consistent with claims from a former employee, Aditya Baradwaj, about significant losses due to poor security practices.
Alameda had a “semester bonus system” providing loans to employees, allegedly funded with FTX customer money and loans from flexible lenders. Allegations suggested that Binance CEO Changpeng ‘CZ’ Zhao’s tweets added to the problems, but the primary issue was the misuse of FTX customer funds.
SBF considered starting a new company, and Caroline admitted to wrongdoing in front of about 30 staffers during a company-wide meeting following FTX’s difficulties.
Caroline Ellison confirmed that the decision to repay loans with customer funds involved Sam Bankman-Fried, Gary, and Nishad.
The Founder of FTX Engaged in Japanese Bond Trading
The next witness, Christian Drappi, who worked as an Alameda software engineer, had an office within 40 feet of Sam Bankman-Fried (SBF) in the New Albany condo worth $30 million in 2022. Drappi believed that everyone answered to Bankman-Fried, and he had complete access to everything.
Employees were shocked to learn about discussions of a Binance takeover through social media posts from FTX and Alameda’s Hong Kong office. They then turned to Caroline Ellison for updates on November 8 before a staff meeting was called. Drappi mentioned that he resigned just 24 hours after this all-hands meeting.
Prince from BlockFi Gives Testimony
In Sam Bankman-Fried’s trial, the seventh witness was BlockFi’s CEO, Zac Prince. He revealed that BlockFi began lending money to Alameda and FTX in early 2021. However, in June 2022, BlockFi recalled open-term loans totaling $650 million, and shortly after that, they declared bankruptcy, which coincided with FTX’s financial troubles.
The court session ended at 4:30 p.m. New York time, and Judge Kaplan adjourned it until October 13. Prosecutors mentioned that they have two more witnesses to bring forward, including a law enforcement agent.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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