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Sam Bankman-Fried Urged Me to Commit Crimes, Said Caroline Ellison

2 mins
Updated by Bary Rahma
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In Brief

  • Caroline Ellison testified against Sam Bankman-Fried, implicating him in financial crimes through their crypto trading platforms, FTX and Alameda Research.
  • Ellison disclosed a scheme to mislead lenders by falsifying Alameda's balance sheets and manipulating the price of FTT under Bankman-Fried's instructions.
  • The fraudulent activities led to a sharp downfall of FTX and Alameda, igniting a series of legal battles with charges against both Ellison and Bankman-Fried.
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Caroline Ellison, former co-CEO of Alameda Research, testified against Sam Bankman-Fried, the former CEO of FTX, implicating him in a series of financial crimes.

The allegations stemmed from activities conducted through cryptocurrency trading platforms FTX and Alameda Research, both of which saw a sharp downfall in November 2022.

Caroline Ellison Testifies Against Sam Bankman-Fried

Caroline Ellison, who also had personal relations with Bankman-Fried, revealed in a Manhattan courtroom on Tuesday that she was instructed to divert funds from FTX customers to settle debts of Alameda Research.

The misdirection of around $14 billion was mentioned, alleging that Bankman-Fried established the system allowing such financial misconduct.

“Sam directed me to commit these crimes,” she stated.

Elison highlighted an orchestrated effort to mislead lenders by presenting falsified balance sheets. The goal was to make Alameda’s losses appear less risky than they were in reality. This statement was a part of her testimony that lasted about 10 minutes.

Read more: Who Is John J. Ray III, FTX’s New CEO?

The accusations followed similar testimony from Gary Wang, FTX co-founder, is cooperating with the prosecution. Both Ellison and Wang face charges, including wire fraud, conspiracy to commit fraud, and money laundering.

Bankman-Fried, on the other hand, faces seven federal charges with a possibility of life imprisonment if found guilty. His trial will continue in March 2024, with additional charges awaiting.

The SEC Blames Bankman-Fried of Fraud

The US Securities and Exchange Commission (SEC) added that under Bankman-Fried’s instructions, Ellison manipulated the price of a digital token issued by FTX. Alameda then used the altcoin as collateral for undisclosed loans taken from FTX.

This alleged manipulation falsely showcased higher collateral, making FTX appear financially healthier than it was.

“FTT — an illiquid crypto asset security that was issued by FTX and provided to Alameda at no cost. Ellison, acting at the direction of Bankman-Fried, engaged in automated purchases of FTT tokens on various platforms in order to increase the price of those tokens and inflate the value of Alameda’s collateral, which allowed Alameda to borrow even more money from external lenders at increased risk to the lenders and to FTX’s investors and customers, all in furtherance of the scheme,” court documents read.

Once a hallmark in the industry, FTX began its rapid descent after exposure to the tight financial links with Alameda. The subsequent events led to a significant drop in the value of Alameda’s digital token holdings. Subsequently causing panic among FTX customers and leading to a withdrawal halt, followed by bankruptcy filings from both companies.

Read more: FTX Collapse Explained: How SBF’s Empire Fell

The ongoing trial, paired with the testimonies of Ellison and other executives, unveils the fraudulent underpinnings that led to the fall of FTX. This is a stark reminder of the regulatory and ethical scrutiny facing the crypto industry.

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Bary Rahma
Bary Rahma is a senior journalist at BeInCrypto, where she covers a broad spectrum of topics including crypto exchange-traded funds (ETFs), artificial intelligence (AI), tokenization of real-world assets (RWA), and the altcoin market. Prior to this, she was a content writer for Binance, producing in-depth research reports on cryptocurrency trends, market analysis, decentralized finance (DeFi), digital asset regulations, blockchain, initial coin offerings (ICOs), and tokenomics. Bary also...
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