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Caroline Ellison – Sam Bankman-Fried’s 28-year-old girlfriend and former CEO of Alameda Research, a company founded by SBF – has admitted in recent testimony that she knows what happened to FTX was wrong.
Caroline Ellison at FTX: That’s Wrong
The big bang for FTX came in the form of Alameda, which borrowed money from crypto exchanges in user funds to pay off separate debts. Both companies are required to remain individual entities. In bringing the two together through lending various funds, it is very likely that Sam Bankman-Fried is involved in illegal activities.
It is also alleged that some of the user funds were used to pay for luxury Bahamian properties for exchange employees and executives.
Ellison recently pleaded guilty to multiple federal charges and has vowed to cooperate with prosecutors against his girlfriend SBF in exchange for leniency. In recent testimony, he laid out the situation involving Alameda and FTX and said he knew the activities he and his constituents were involved in were wrong. She says:
I know it’s wrong… From 2019 to 2022, I became aware that Alameda was granted access to a loan facility at FTX.com, a cryptocurrency exchange run by Mr. Bankman-Fried. In practical terms, this arrangement allows Alameda to access unlimited lines of credit without being required to post collateral, without having negative balances, and without being subject to margin calls on the FTX.com liquidation protocol. If an Alameda FTX account has a significant negative balance in a particular currency, it means that Alameda is borrowing funds deposited by FTX customers on the exchange.
With his testimony, the situation is looking a bit grim for Sam Bankman-Fried, who was recently extradited back to the United States. He is currently awaiting trial at his parents’ home in California. Ellison said that at first, he had no trouble hiding the relationship between Alameda and FTX from customers. He commented:
I agreed with other people to borrow several billion dollars from FTX to pay off the loan.
In an interview in late November, Sam Bankman-Fried said that he had made many mistakes during his time at FTX and that he had no intention of hurting anyone. He has stated:
I made a lot of mistakes. There are things I would give anything to be able to do again. I’ve never tried to scam anyone.
The SEC Has Stepped Up
In a civil complaint against Sam Bankman-Fried, the Securities and Exchange Commission (SEC) said crypto executives were involved in a long-term scam that resulted in billions of dollars in losses. The complaint reads:
Bankman-Fried orchestrated a massive scam for years, diverting billions of dollars from trading platform customer funds for his own personal gain and to help grow his crypto empire.
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