Caroline Ellison’s testimony Sam Bankman-Fried’s trial extended into the second day, delving into the state of cryptocurrency trading firm Alameda Research’s faulty balance sheets.
“We were in a bad situation,” Ellison said, referring to the period between May and June 2022. “(We were) worried if someone found out that everything would fall apart.”
At that time, Terra/LUNA collapsed, causing several players in the cryptocurrency market to struggle and the cryptocurrencies to lose value. The stablecoin implosion occurred months before FTX itself collapsed, an event that was triggered when a balance sheet was changed. crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet/” target=”_blank” rel=”noopener”>leaked by CoinDesk that call into question their solvency. Ellison testified that the balance sheet was one shared with lenders, not the exact one the company used internally. This means that the balance sheet reported by CoinDesk was also “dishonest” and still “underestimated the real risk” of Alameda and FTX.
Ellison testified that Alameda had to pay cryptocurrency lenders like Genesis, who asked for loans to be repaid. He said FTX customer deposits were used to pay lenders, and when lenders requested balance sheets in mid-June 2022, FTX amended them because “Alameda was in a very bad situation” and it did not want “(Genesis ) knew that.”
But instead of sending truthful balance sheets, showing how much money Alameda “borrowed” from FTX, they modified them to “make (their) leverage and risk appear lower.” This was done under Bankman-Fried’s direction, Ellison said.
He added that this was done for several reasons, one of which was that Alameda did not want Génesis to withdraw all of Alameda’s loans or for the news to spread because it would add concern about the company.
“I didn’t want to be dishonest but I also didn’t want to tell the truth,” Ellison said on the stand.
So he prepared seven balance sheets for Bankman-Fried to review with “alternative ways” of presenting his financial situation to “hide things” that “they both thought were bad.” These balance sheets were made “to make it easier for lenders to see them,” Bankman-Fried said at the time, according to Ellison.
At that time, in June 2022, Alameda borrowed $9.9 billion from FTX clients, which “made it clear that Alameda was in a risky situation,” Ellison said, and would make FTX “look very bad.” It also had $1.8 billion worth of open-term loans that would have to be repaid any time a lender approached for repayment, as well as $2.9 billion in term loans that were “long-term liabilities.” deadline,” Ellison said. .
The company at the time had about $12 billion in liabilities and $3 billion in liquid assets, according to Ellison.