In an unexpected development, a confidential audio recording from Bloomberg has exposed a shocking revelation about Alameda Research. Former employees of the company discovered that Alameda had been using funds from FTX users’ deposits without their knowledge.
Behind Closed Doors: Alameda’s Confession
During a meeting in Hong Kong, Caroline Ellison, the former CEO of Alameda, disclosed to her team that the company had secretly been obtaining funds through open-term loans and investing them in assets that were difficult to liquidate. Many of these investments were connected to FTX and its American counterpart.
As a result, several of Alameda’s loans were recalled, forcing the company to withdraw a significant amount from FTX. This led to a substantial depletion of FTX user funds. Ellison admitted that Alameda had consistently been allowed to borrow from FTX users.
Christian Drappi: From Developer to Key Witness
Christian Drappi, a software developer who had worked with Alameda for over a year, played a crucial role in this revelation. Drappi was interrogated in court following Ellison’s testimony. Until the meeting, Drappi and other Alameda staff were unaware of the company’s alleged use of FTX deposits for its trading activities.
In the recorded conversation, an unsettled Drappi questioned Ellison about when she became aware of Alameda’s wrongful use of FTX user deposits and who within the company knew about it.
The Collapse Preceding Bankruptcy
Aditya Baradwaj, an engineer from Alameda Research, described the tense atmosphere during the meeting as Ellison revealed unprecedented information. This included a scrapped plan for FTX to be acquired by its largest competitor, Binance.
These revelations solidified the belief that Alameda had a grim future. In the aftermath, many severed their ties with the company. Just two days later, FTX, the renowned cryptocurrency exchange, filed for bankruptcy.
The Tweet that Changed Everything
All of these events were set in motion when Tony Qian, Drappi’s colleague, discovered a post on Twitter by Sam Bankman-Fried, the founder of Alameda and FTX. The post hinted at a major collaboration between FTX and Binance. Ellison confirmed this news, attributing FTX’s insufficient user funds to large loan repayments.
Hot Take: The Fall of Alameda Research and FTX
The revelation of Alameda Research’s wrongful use of FTX user deposits has dealt a severe blow to both companies. It has exposed unethical practices within Alameda and led to a significant loss of trust among FTX users. The subsequent bankruptcy filing by FTX highlights the dire consequences of this misconduct. This incident serves as a cautionary tale for the crypto industry, emphasizing the importance of transparency and ethical behavior to maintain user confidence.
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