Sam Bankman-Fried has been in the news for the past two months because of events surrounding the dramatic fall of his companies, FTX and Alameda Research. SBF witnessed everything, from being accused of scamming people to getting arrested for money laundering, wire fraud, and many other serious accusations. After being arrested by the Bahamian authorities, Bankman-Fried was extradited to the US for being prosecuted by the US authorities. Along with SBF, his two business partners were also held accountable for their involvement in the collapse of FTX. However, SBF was bailed by his parents who paid the bail amount of $250 million which they generated against their home. But now, Caroline Ellison, the former CEO of Alameda Research admitted on Monday that she actively stole billions of dollars from the customers of FTX Exchange, in which her fellow associates were involved too. This reveal has increased problems for Sam Bankman-Fried.
Caroline Ellison admitted in front of a federal judge in New York that she and many associates of Alameda Research were involved in stealing money from the FTX customers. Ellison said that she is extremely sorry for her actions and that she was completely aware that what she was doing was indeed wrong. Ellison revealed many secrets related to Alameda Research and how the company used its position to exploit the customers of FTX. She told the court that Alameda Research has complete control over how much money it can borrow from FTX, which allowed the Alameda Research associates to use the money of FTX customers without any limit or providing any reason for borrowing money. She and other associates were aware of the fact that by doing so, they will be using the customer money which FTX manages, but still chose to continue. Ellison revealed another shocking fact that despite being completely separate companies, FTX and Alameda Research were kept in a close relationship. This fact was completely kept hidden from the investors and customers of both companies. Regarding the involvement of Sam Bankman-Fried, Ellison said that she agreed with the decision of SBF and other associates to provide misleading financial reports to the lenders of Alameda Research. This decision allowed Ellison and Alameda associates to hide their acts of borrowing money from FTX in the balance sheets.
Because of Ellison’s actions, she has been charged with seven serious criminal charges which include her involvement to conduct wire fraud and money laundering. She was closely associated with Sam Bankman-Fried and even dated him in the past. Hence, her opening of almost all the dark secrets of Alameda Research is surprising, especially when SBF just received bail. She said that Alameda associates made such arrangements that allowed them to borrow credit from FTX without having to mention anything in the balance sheet or pay any interest on the borrowed credit. Ellison admitted that Alameda was constantly borrowing money from FTX, which FTX customers had stored in their accounts at FTX. Gary Wang, former chief technology officer at FTX, said similar things regarding Alameda’s shady practices. He was involved in altering the code of FTX, which allowed Alameda special privileges.