As part of her plea agreement, Caroline Ellison, the former CEO of Alameda Research, acknowledged knowing that FTX funds had been made available for the venture capital firm’s investments.
Ellison acknowledged the financial ties between FTX and Alameda at the centre of the prosecution’s case against former FTX CEO Sam Bankman-Fried in a transcript of the proceedings for her plea agreement in the Southern District of New York released on December 23. The former Alameda CEO claimed that from 2019 to 2022, FTX provided Alameda with access to a “borrowing facility.”
I was aware that Alameda’s FTX.com account had been customised by FTX executives in a way that allowed Alameda to keep negative balances in a variety of fiat and virtual currencies, said Ellison. Practically speaking, this arrangement gave Alameda access to an unlimited line of credit without the need to post collateral, pay interest on negative balances, or be subject to margin calls or FTX.com’s liquidation procedures. Added her:
“If Alameda’s FTX accounts had significant negative balances in a particular currency, it meant that Alameda was borrowing funds that FTX’s customers had deposited onto the exchange.”
In his statement, Ellison made claims about Bankman-Fried and other executives from FTX who allegedly borrowed money from Alameda and used it to pay back “loans worth several billion dollars.” She claimed that the majority of FTX customers would have anticipated this use of their money, and that she and Bankman-Fried approved “materially misleading financial statements” for Alameda lenders despite knowing that doing so was against the law.
Ellison said, “I am truly sorry for what I did. “I knew it was wrong,” you said.
In large part, Bankman-Fried was exempted from many of the current charges Bankman-Fried is facing, including wire fraud and securities fraud, as a result of Ellison’s plea agreement, which was announced on December 21. Despite the possibility of further criminal tax prosecution, the agreement set her bail at $250,000 with the requirement that she turn over all travel documents.
After spending more than a week in the Bahamas’ Fox Hill Prison, Bankman-Fried was extradited to the United States on December 21. The former CEO of FTX was given home detention with an ankle bracelet after his parents posted a $250 million bond. On Jan. 5, he is anticipated to make another court appearance.
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