Sam Bankman-Fried and other FTX executives received billions of dollars in secret loans from the crypto mogul’s Alameda Research, according to the hedge fund’s former chief, who pleaded guilty to her role in the exchange’s demise.
According to a transcript of her Dec. 19 plea hearing that was unsealed on Friday, Caroline Ellison, former CEO of Alameda Research, agreed with Bankman-Fried to conceal from FTX’s investors, lenders, and customers that the hedge fund could borrow unlimited sums from the exchange.
“We prepared certain quarterly balance sheets that concealed the extent of Alameda’s borrowing and the billions of dollars in loans that Alameda had made to FTX executives and related parties,” Ellison said in Manhattan federal court, according to the transcript.
As part of their plea agreements, Ellison and FTX co-founder Gary Wang both pleaded guilty and are cooperating with prosecutors. Their sworn statements provide insight into how two of Bankman-former Fried’s associates might testify as prosecution witnesses against him at trial.
In a separate plea hearing on December 19, Wang stated that he was directed to make changes to FTX’s code to give Alameda special privileges on the trading platform, despite knowing that others were telling investors and customers that Alameda did not have such privileges.
Wang did not say who gave him the instructions.
Prosecutor Nicolas Roos stated in court on Thursday that Bankman-trial Fried’s would include testimony from “multiple cooperating witnesses.” According to Roos, Bankman-Fried committed a “fraud of epic proportions,” resulting in the loss of billions of dollars in customer and investor funds.
Bankman-Fried acknowledged risk-management failures at FTX but claims he is not criminally liable. He has yet to enter a plea.
Bankman-Fried founded FTX in 2019 and profited from the rise in the value of bitcoin and other digital assets to become a multi-billionaire and influential donor to US political campaigns.
Following a flurry of customer withdrawals in early November due to concerns about the commingling of FTX funds with Alameda, FTX declared bankruptcy on November 11.
Bankman-Fried, 30, was released on bail of $250 million on Thursday. His spokesman declined to comment on the statements made by Ellison and Wang.
Wang and Ellison’s attorneys declined to comment.
Ellison testified in court that when investors recalled loans made to Alameda in June 2022, she agreed with others to borrow billions of dollars in FTX customer funds to repay them, with the understanding that customers were unaware of the arrangement.
“I truly apologise for what I did,” Ellison said, adding that she is assisting in the recovery of customer assets.
Wang also stated that he was aware that what he was doing was wrong.
The transcript of Ellison’s hearing was initially sealed because prosecutors were concerned that disclosing her cooperation would jeopardise their efforts to extradite Bankman-Fried from The Bahamas, where he lived and FTX was based, according to court records.
Bankman-Fried was arrested on December 12 in Nassau and arrived in the United States on Wednesday after agreeing to extradition.
A judge ordered him confined to his parents’ California home until trial.
