As the controversial trial of FTX-founder, Sam Bankman-Fried, continues, a recording played in court of Caroline Ellison’s meeting with Alameda employees on November 9th 2022 appears to unveil even more shocking insights into the Alameda-FTX saga.

The recording, as reported by Cointelegraph, covers a meeting in Hong Kong, shortly before FTX’s now-famous collapse, wherein Alameda CEO, Caroline Ellison, broke the news about Alameda’s relationship with FTX to nearly half of the trading firm’s internal team.

Cointelegraph, having allegedly gained access to the recording, pointed to a number of key tenets revealed by the evidence. The publication also points to Caroline Ellison’s “nervous laughter” in the recording - something the now-witness is alleged to exhibit in tense situations. 

Alameda and FTX: A Destructive Relationship

First and foremost, Ellison admits to the Alameda team that the firm had been borrowing from FTX for some time, and that said funds had been used to make investments on behalf of Alameda. Crucially, however, these investments were illiquid, meaning their value could not be recouped in short order - for instance, in the event of a crisis.

“Most of Alameda’s loans got called in in order to meet those loan recalls. We ended up borrowing a bunch of funds on FTX, which led to FTX having a shortfall in user funds. And so with the, once there started being like FUD about this and users started withdrawing funds.” - quotation from the recording, according to Cointelegraph

As mentioned by Ellison in her testimony itself, FTX was planning to raise capital from external investors, by selling FTX equity, to cover the shortfall created by Alameda’s bad loans. This would have potentially involved misleading would-be investors as to the motivations behind an FTX equity-based capital raise.

“Basically FTX is trying to raise in order to do this [compensate users], but yeah, after the crash, no one wanted to invest. I don’t know, obviously, in retrospect, the plan of waiting around for several months and like for the market environment to get better and then raise.” - a further quotation from the recording, reported by Cointelegraph

Together From Day 1…

It is further reported that, when Ellison was asked by an Alameda employee about how long Alameda had been using customer funds for various purpose, Ellison responded with the below, illustrating the long history of mispractice shared by the two organizations.

“FTX basically always allowed Alameda to, like, borrow user funds, as far as I know”

The Saga Continues

SBF’s ongoing trial in New York has provided no shortage of shocking accusations and alleged facts. From a supposed $150 million bribe to Chinese officials, through to Ellison and Bankman-Fried’s on-and-off love affair - Though it is a major blow to the industry that such a trial is even necessary, we can no doubt expect more hidden truths to rise to the surface as the investigation continues…