Alameda Research CEO Caroline Ellison Testifies Against Sam Bankman-Fried in Fraud Trial
Alameda Research CEO Caroline Ellison, who is also the on-and-off girlfriend of Sam Bankman-Fried, the majority owner of the trading firm, has shared a document outlining her estimation of Alameda’s risk. Despite her conclusion that things were going well, the Terra stablecoin depegged that night, causing a crash and wiping out $45 billion in value. Now, Ellison is testifying against Bankman-Fried in his trial for fraud and conspiracy. Prosecutors are highlighting how Ellison deferred to Bankman-Fried on critical matters and revealed surprising statements he made, including his belief that there was a 5% chance he would be elected President.
Bankman-Fried’s Insatiable Hunger for Capital
A narrative has emerged during Ellison’s questioning that Bankman-Fried constantly sought new capital to fund his big bets. Alameda Research borrowed money from friends, family, third-party lenders, and customer deposits to enable more trades and investments. Ellison admitted that she was somewhat concerned about borrowing customer funds without their knowledge. Bankman-Fried also created the FTT token and instructed Ellison to covertly buy it to secure loans from lenders like Genesis.
Sam Spent Billions as Alameda’s Foundation Weakened
As Alameda borrowed more money, its collateral became thinner and relied on illiquid tokens closely tied to Bankman-Fried. When he had trouble securing immediate funding from lenders and investors, Bankman-Fried authorized borrowing funds from FTX customer deposits for important deals. Despite the increasing risk, Bankman-Fried continued to borrow billions for venture capital investments, even though it put Alameda in a riskier position. Additionally, Alameda borrowed $5 billion in loans for executive financing and political donations.
Hot Take: The Downfall of Alameda Research
The testimony from Caroline Ellison reveals a pattern of risky financial decisions made by Sam Bankman-Fried that ultimately led to the downfall of Alameda Research. Bankman-Fried’s insatiable hunger for capital and willingness to borrow from various sources, including customer deposits, posed significant risks to the firm. Despite warnings from Ellison, he continued to make high-risk investments and borrow billions, causing the foundation of Alameda to weaken. This trial serves as a reminder of the importance of responsible financial management and transparency in the crypto industry.
By
By
By
By
By