In the lead-up to the collapse of crypto exchange FTX, former CEO Sam Bankman-Fried was allegedly engaged in a series of high-stakes actions, as revealed in the personal notes of former Alameda Research CEO Caroline Ellison during her testimony in a New York trial. Bankman-Fried’s actions included:
- Worries and Strategies: Bankman-Fried was reportedly “freaking out” about multiple concerns. He considered shutting down Alameda due to a significant crash in the Terra ecosystem. His ambitious plan involved raising $1 billion in capital from a Saudi Prince, known for blockchain gaming investments through Saudi Arabia’s sovereign wealth fund. Additionally, he aimed to persuade regulators to crack down on the crypto exchange Binance, with the goal of increasing FTX’s market share. However, the specifics of his strategies were not disclosed.
- Financial Moves: Bankman-Fried sought additional funds from crypto lender BlockFi, which had already provided Alameda with over $660 million. He was also involved in trading Japanese government bonds and buying Snap Inc (SNAP) stocks.
- Concerns and Hedges: The notes mentioned Bankman-Fried’s concern about “Willie being happy.” While the identity of “Willie” was not specified, it could have been a reference to William MacAskill, his mentor. Bankman-Fried attributed Alameda’s difficulties and poor hedging to Ellison, even though she noted that a better hedge strategy might have helped during the crypto winter.
- Financial Troubles: Alameda faced substantial financial difficulties, including open-term loans and expenditures from its line of credit with FTX. The loans, with no maturity date, led to lenders, such as Genesis Capital, requiring repayment. Ellison revealed that she repaid part of Alameda’s debts to FTX using customer funds. By September 2022, Alameda’s liabilities with FTX had reached $13.7 billion, while open-term loans amounted to $1.3 billion.
- Concealing Liabilities: Ellison created “alternative” spreadsheets for Alameda’s lenders, obscuring the company’s financial liabilities with FTX to make its financial situation appear better and prevent lenders from demanding full repayment.
- Emotional Stress: Ellison shared her anxiety about a “liquidity crush” at Alameda, where she worried daily about the possibility of multiple loan calls.
One more Caroline Ellison courtroom sketch.
— Ariel Givner, Esq. (@GivnerAriel) October 11, 2023
This one featuring SBF himself! https://t.co/q3O6xqxEhlpic.twitter.com/cQJbj5V1H7
Caroline Ellison’s cross-examination by Sam Bankman-Fried’s defense was set to commence on October 12. These revelations provide insight into the high-pressure environment and complex financial dealings within the cryptocurrency industry and its impact on the companies and individuals involved.
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