Friday, 8 December 2023

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secret recording offers trove of explosive revelations

secret recording offers trove of explosive revelations

The ongoing trial of former FTX CEO Sam Bankman Fried has uncovered a series of explosive revelations in the form of testimonies from former key FTX and Alameda executives. 

The latest court proceedings on Oct. 12 saw former Alameda Research CEO Caroline Elisson testify for the third day, following which the jury was presented with a recording of a meeting she held with Alameda staffers on November 9, 2022, just days before the collapse of the FTX empire.

The meeting, held in Hong Kong and joined by nearly half of Alameda’s employees, was the key moment Ellison came clean about the ongoing scenario with the crypto exchange to her colleagues. This admission was accompanied by a series of explosive revelations about Alameda’s financial relationship with FTX. Cointelegraph has obtained access to the secret recording and we have curated a list of four striking elements that it’s revealed.

Alameda’s bad investments led to the financial crisis at FTX

The first and most crucial revelation by Ellison came early in the meeting when she revealed that Alameda had been borrowing money from FTX for a year. She went on to admit that Alameda had made a number of illiquid investments using the borrowed funds.

Due to the market downturn, Alameda’s loan positions were called in, creating a shortfall in FTX’s balance sheet. An excerpt from the discussion:

“Most of Alameda’s loans got called in in order to meet those loan recalls. We ended up borrowing a bunch of funds on FDX, which led to FTX having a shortfall in user funds. And so with the, once there started being like FUD about this and users started withdrawing funds,”

Ellison went on to reveal that Alameda’s bad loans created market panic around FTX, causing users to begin withdrawing their funds. FTX then paused withdrawals to contain the situation and within days the exchange came crashing down.

FTX planned to raise more funds to compensate users

When one of the employees attending the meeting asked Ellison how FTX intended to pay back its customers, Ellison said that the crypto exchange was planning to raise further funds to fill the gap.

“Basically FTX is trying to raise in order to do this [compensate users], but yeah, after the crash, no one wanted to invest. I don’t know, obviously, in retrospect, the plan of waiting around for several months and like for the market environment to get better and then raise.”

During the court proceedings on Thursday, Christian Drappi, a former software engineer…

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