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Caroline Ellison on FTX Closure & SBF’s Equity Sale

Caroline Ellison Details Financial Maneuvers in FTX Crisis

During her second day of testimony in the trial of Sam Bankman-Fried on October 11, Caroline Ellison provided further insights into the events leading up to the anticipated FTX crisis in November 2022.

Caroline Ellison before her testimony agains SBF

Due to the market downturn in May, lenders demanded that Alameda Research repay millions in loans in mid-June, causing significant stress, according to Ellison’s statements.

Genesis Capital, one of these lenders, recalled $500 million in loans based on conversation screenshots exchanged between Ellison, Bankman-Fried, and Genesis employees via Telegram.

At that time, Alameda held a debt of over $13 billion on its credit line with FTX, with open-term loans exceeding $1.3 billion. According to Ellison’s testimony, Bankman-Fried instructed her to devise “alternative ways” for disclosing Alameda’s financial details to lenders, with a particular focus on Genesis.

Ellison expressed her reluctance for Genesis to be aware of this, especially concerning Alameda’s substantial financial responsibility to FTX, as it could potentially lead to Genesis calling in all of Alameda’s loans, harming its reputation.

As evidenced by the prosecution, Ellison worked on a minimum of seven alternative spreadsheets for Genesis. An Alameda spreadsheet sent to Genesis in June indicated total liabilities of $10.3 billion, whereas the accurate amount was around $15 billion at that time.

Bankman-Fried’s strategies for weathering the crisis included securing capital from Saudi Crown Prince Mohammed bin Salman. According to court evidence, Ellison compiled a list of “things Sam is freaking out about” several months before the exchange’s collapse.

The list included actions such as securing funding from “the MBS,” obtaining additional capital from BlockFi, which had previously extended loans of more than $660 million to Alameda. Additionally, it entailed “getting regulators to crack down on Binance,” a move by Bankman-Fried aimed at expanding FTX’s market presence, as explained by Ellison.

Ellison also brought up an alleged $150 million payment that FTX purportedly made to a Chinese official in 2021 to release funds frozen as part of a money laundering investigation. It’s worth noting that this alleged bribe is not part of the United States trial.

You can read prior updates here and here.

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