- Former Alameda Research CEO Caroline Ellison’s testimony reveals jarring details about the inner workings of FTX and Alameda.
- In an explosive testimony, Ellison has revealed Sam Bankman-Fried’s plots to bring down Binance.
- The tenuous relationship between Bankman-Fried and Binance CEO Changpeng “CZ” Zhao played a crucial role in FTX’s collapse.
Revelations from former Alameda Research CEO Caroline Ellison’s testimonies have rocked the Sam Bankman-Fried (SBF) trial in its second week, uncovering shocking details about the inner workings of FTX and Alameda.
Among the most startling revelations is Bankman-Fried’s obsession with dissociating himself from and crippling Binance in his quest to rise to the top of the crypto world.
SBF’s Plot to Sic Regulators on Binance
In sworn testimony on Wednesday, October 11, Ellison told the court that one of the things Bankman-Fried was “freaking out about” in the months leading up to FTX’s collapse was getting regulators to take action against Binance.
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The testimony suggests that before then, the disgraced FTX founder had actively lobbied for this outcome and even obtained promises from regulators to this end. However, he appeared to grow frustrated when it appeared that regulators were not making good on their promises. Ellison did not specify who these regulators were.
According to Ellison, Bankman-Fried was obsessed with achieving this outcome as he believed it was the best way for FTX to gain market share.
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"He said that if there was a regulatory action taken against Binance that a lot of Binance customers might move to FTX and that he had been hoping this would happen for a while, and various regulators had been promising him that this would happen for a while, but it never happened," Ellison reportedly testified.
At its peak, FTX was the second-largest crypto exchange in the world, behind only Binance. While a bit of rivalry among leading firms is nothing new in the business world, the feud between Bankman-Fried and Binance CEO Changpeng “CZ” Zhao seems to run deep, as highlighted by the bickering between the two in FTX’s last days and Ellison’s testimony.
From Business Partners to Bitter Rivals? The Tenuous Relationship Between SBF and CZ
Judging by the available accounts at the time, the relationship between Bankman-Fried and Zhao appeared to start akin to a business partnership with Zhao’s Binance, making a strategic investment in FTX in December 2019.
For many, the first sign of a potential rift between the industry leaders was FTX’s decision to buy out Binance’s equity stake and the latter’s absence from FTX’s series B funding round in 2021. But there was not much to go on as Bankman-Fried and Zhao played it cool with the media, telling the public that they dissolved the investment relationship on good terms.
However, if details of Michael Lewis’ “Going Infinite” are anything to go by, Bankman-Fried’s angst for the Binance chief started long before they got in bed together. In the book, Lewis suggests that the FTX founder was significantly pissed off when Zhao refused to purchase a futures exchange from him in March 2019, allegedly calling the Binance chief a “douche” for turning him down.
Moreover, according to testimony from former Alameda CEO Caroline Ellison, Bankman-Fried was so desperate to cut ties with Binance that he funded the buyout with $1 billion in customer deposits.
Bankman-Fried and Zhao’s tenuous relationship would eventually play a key role in FTX’s collapse, as the Binance chief fueled panic about the exchange’s health by revealing that Binance was about to dump its FTT holdings worth over $500 million on the open market. At the time, Zhao posted a cryptic tweet about FTX secretly lobbying against Binance.
"We won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby against other industry players behind their backs," Zhao tweeted.
On the Flipside
- Bankman-Fried appears to believe that Binance secretly leaked the Alameda balance sheet that first sparked panic about FTX’s financial health.
- Ellison entered a plea deal shortly after FTX’s collapse.
- In 2023, Binance has drawn the ire of several regulators, facing lawsuits from the U.S. CFTC and SEC.
Why This Matters
Ellison’s testimony highlights the depth of the rivalry between Bankman-Fried and Binance’s Zhao and the risks the former was willing to take to topple Binance.
Read this to learn more about Bankman-Fried’s stunning fall:
Sam Bankman-Fried: Crypto’s Fallen Hero?
Find out other jarring revelations from Ellison’s testimony:
Ellison Details How Alameda Used FTX Deposits to Stay Afloat
