News - How Alameda and FTX bribed officials and falsified balance sheets

By Mike Hesp

How Alameda and FTX bribed officials and falsified balance sheets

FTX
Scams, crime and fraud

Bribery and accounting fraud: Caroline Ellison gave shocking insights into the ins and outs of FTX and Alameda in the SBF lawsuit.

The hearing with crown witness Caroline Ellison was the longest yet in the trial of FTX founder Sam Bankman-Fried. The former CEO of Alameda Research spent three days on the witness stand, during which she revealed even more shocking details. In addition to using FTX customer funds and unlimited credit limits, Ellison also admitted to bribing government officials and falsifying financial statements. What the crown witnesses revealed.

"Alameda should look less risky."

Much of the money Alameda borrowed from other companies was from indefinite loans. Lenders could ask for their money back at any time, Ellison says.

By mid-June 2022, Ellison was in talks with Matt Ballensweig, who at the time was head of loans was at Genesis. The lending service had previously loaned Alameda $400 million and was now demanding that money back. According to Ellison, the company used customer funds from FTX to make the repayment possible.

But Ballensweig also wanted to get a more detailed picture of Alameda's financial condition and asked Ellison for an overview of the company's assets. The CEO of the crypto hedge fund then first prepared an internal company balance sheet, listing assets and liabilities.

This showed that Alameda had more assets than liabilities, but that this figure was significantly inflated by the number of FTTs (FTX's own tokens) held. According to Ellison, the internal balance sheet also showed how risky Alameda's investment strategy actually was and how much FTX customer money the company had - about $10 billion.

SBF and Ellison were clear that this balance sheet could not be shared with Genesis because they might have shared the information with other market participants. So Ellison produced a total of seven different balance sheets that disguised Alameda's true financial condition. She submitted each version to SBF for review. On the seventh attempt, the FTX founder finally gave his approval. Ellison sent the version to Genesis. In it, there was no mention of the money Alameda owed FTX. Instead, the numbers were shifted so that the total assets looked larger and the number of liabilities smaller. It was supposed to look "less risky," Ellison said.

Ellison then regularly updated this internal balance sheet. According to his own statements, the position of borrowed money from customers grew steadily in the process. By October 2022, a month before the collapse, the value was $14 billion.

Bitcoin manipulation and a deal with Saudi Arabia

Ellison had been clear that urgent action was needed to mitigate risks. Together with SBF, she discussed ways to provide Alameda with new liquidity. According to Ellison, Bankman-Fried suggested two ideas: On the one hand, Alameda would Bitcoin had to sell as soon as the price rose above US$20,000. On the other hand, shares in the company would have to be sold to raise new money. Ellison said SBF was actively seeking new investors, including Mohammed Bin Salman, the crown prince of Saudi Arabia. An investment of about $250 million was in the offing. However, the deal did not go through.

$150 million to Chinese officials

According to Ellison, Alameda was always looking for new liquidity. The former head of the crypto hedge fund described a 2021 situation to the court. The Chinese government had frozen Alameda's accounts in the course of a money laundering investigation. One billion U.S. dollars was under lock and key.

SBF wanted to recover the funds. It put employees in Hong Kong to work. They first tried to find a lawyer. When that failed, one of the employees, David Ma, convinced FTX's CEO to try it "his way." According to Ellison, Alameda had to pay about $150 million to Chinese officials to get the funds released again.

Internally, she called this payment only "The Thing." Ellison said she gave the transaction that name: "Because I didn't want to put on paper that we were making payments that looked like bribes to me."

Download the Anycoin App

Finally, a crypto app for everyone!

Check it out