Ellison Details How Alameda Used FTX Deposits to Stay Afloat

Caroline Ellison delves into how Alameda misappropriated FTX customer deposits to stay afloat.

Caroline Ellison dancing on a table while others make it rain.
  • Former Alameda Research CEO Caroline Ellison has retaken the stand in the trial of Sam Bankman-Fried (SBF).
  • Ellison’s latest testimony delves into how FTX customer deposits were misappropriated for Alameda’s needs.
  • The former Alameda chief expressed that she feared that word would get out one day.

The trial of disgraced FTX founder Sam Bankman-Fried (SBF) has resumed with continued testimony from former Alameda Research CEO Caroline Ellison. 

Building on testimony from Tuesday, October 10, where she pointed to the disgraced FTX and Alameda founder as the mastermind behind the alleged fraud committed at the two companies, the former Alameda chief has delved into details of how Alameda used FTX customer deposits to repay loans.

Market Downturn Led to Loan Recalls

In sworn testimony on Wednesday, October 11, Ellison asserted that Alameda had found itself in a pinch as the intensifying bear market forced lenders to recall loans to the trading firm. In one instance highlighted by the prosecution, Genesis had called for a $400 million loan repayment. However, per Ellison’s testimony, the trading firm did not have enough to cover these loans.

According to the former Alameda chief, the situation had left her stressed out as she knew that they would have to take from FTX customer deposits, a move that she had established was a long-running practice in testimony on Tuesday. Ellison noted that, as expected, Bankman-Fried gave the go-ahead, directing her, FTX co-founder Gary Wang and co-lead engineer Nishad Singh to repay Alameda loans from FTX customer deposits.

Ellison disclosed that, at one point, only $3 billion in USD deposits were available on FTX out of the $13 billion that customers deposited, as Alameda had borrowed the rest to cover loans. Assuming that the actions taken by the Alameda and FTX leadership were wrong, Ellison noted that she feared there would be a run on the exchange if word got out.

"Yes, I thought it was wrong. We didn't find any new sources of capital. I continued to worry about FTX customers finding out and trying to withdraw all at once," she reportedly testified.

Ellison’s fears would come true months later as rumors of FTX’s insolvency led to run-on deposits that would force the once crypto giant to file for bankruptcy and leave millions of customers in the lurch.

On the Flipside

  • Ellison entered a plea deal with the Department of Justice (DOJ) in December 2022.
  • In open statements, the defense argued that Alameda’s poor shape resulted from Caroline Ellison’s poor risk management.

Why This Matters

The trial of Sam Bankman-Fried has the potential to bring closure to millions of crypto investors who lost money in FTX’s collapse. Ellison’s testimony will likely play a key role in convincing the jury whether the FTX founder’s actions amounted to fraud.

Read this to learn more about SBF and the FTX collapse:
Sam Bankman-Fried: Crypto’s Fallen Hero?

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This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.