NEWSLETTER
A secretly recorded 75-minute audio clip of Caroline Ellison has revealed the exact moment 15 former Alameda Research employees discovered the trading company was “borrowing” funds from FTX users.
The full recording obtained by Cointelegraph provides new insights into the palpable tension Ellison and Alameda staff felt in the lead-up to FTX’s collapse.
“Alameda was borrowing a large amount of money through open-term loans and using it to make various illiquid investments. So, like a lot of FTX and FTX US shares (…) Most of Alameda’s loans were requested to meet those withdrawals,” Ellison explained during a general meeting in Hong Kong on November 9, 2022.
“We ended up borrowing a large amount of funds from FTX, which led to FTX having a shortfall in user funds.”
“(FTX) basically always allowed Alameda to borrow users’ funds,” he added, speaking to the roughly 15 staff members at the meeting.
Also played in court were selected segments of the audio recording of the meeting on the eighth day of Sam Bankman-Fried’s criminal trial on Oct. 12, which were part of the testimony of Christian Drappi, a former software engineer in Alameda.
Drappi’s appearance on the witness stand came immediately after nearly three days of Ellison’s testimony. It is understood that before the meeting, Drappi and many other Alameda employees had no idea that the hedge fund had allegedly been using FTX client deposits to prop up its trading activity.
In the recording, Drappi is also heard asking Ellison when he realized Alameda was misusing FTX users’ deposits and who else at the company knew.
Ellison initially avoided responding, but Drappi pressed again:
“I’m sure this wasn’t something like YOLO, right?”
Related: Changpeng Zhao’s tweet ‘contributed’ to FTX collapse, claims Caroline Ellison
According to the court report of the trial, the playback of this audio led to one of the funniest moments in court, where Drappi had to explain the term “YOLO” to everyone present, saying that he wanted Ellison to confirm that the use of Los Deposits in FTX had not just been a “spontaneous” decision.
In his testimony, Drappi also described Ellison’s demeanor at the meeting as “sloppy” and did not show much trust toward Alameda employees. He said he was “shocked” to learn the extent of the relationship between FTX and Alameda and resigned the next day.
Speaking to Cointelegraph, Alameda Research engineer Aditya Baradwaj, who was also present at the meeting, said the room was “extremely tense,” and Ellison brought to light a lot of new information that had “never been discussed.” internally”, including the subsequently abandoned acquisition. of FTX by its then biggest competitor, Binance.
“It became quite clear that there was no future for the company and that we all had to leave. And we did it right after,” Baradwaj said.
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