- Ellison spilled more beans on FTX and its embattled founder.
- She revealed a multimillion-dollar loss cover-up at the exchange.
- The defense is set to cross-examine Ellison following her testimony.
Former Alameda Research CEO Caroline Ellison took to the witness dock on her second day of testifying against Sam Bankman-Fried (SBF), this time around deposing how FTX covered up a massive loss in 2021 following a margin system malfunction.
The U.S. Department of Justice (DOJ) enlisted Ellison as the prosecution’s star witness in the SBF case after she pleaded guilty to multiple federal charges and agreed to cooperate with the government against the embattled FTX founder in December 2022.
$800 Million BTMX Loss Cover Up
Just moments before the government and the defense swapped the baton for cross-examination, the lead prosecutor, Danielle Sassoon, asked Ellison to elucidate on a multimillion-dollar loss that SBF’s bankrupt crypto exchange sustained while trading BTMX.
Ellison deponed that she knew that in 2021, FTX incurred a massive $800 million loss from its margin system malfunctioning and that the loss was pinned on Alameda to hide it from FTX investors.
Per Ellison’s testimony, SBF revealed how the loss came by.
“From Sam, I learned that FTX had——that there had been a trader on FTX who had taken a large position in BTMX and withdrawn Bitcoin and other, more liquid currencies from FTX, and that he said that Alameda would have to take on the BTMX and try to sell it, which we did, but ended up selling it at a very large loss,” Ellison stated.
Following this development, Bankman-Fried allegedly reiterated that Alameda had to choke on the loss as “he didn’t want it on FTX’s balance sheet.”
More Losses Shrouded in Secrecy
Although she didn’t quote a specific number, Ellison further revealed that the FTX customer in the $800 million BTMX trade was also trading MobileCoin, a position that she averred led to some losses.
According to Ellison, one month before the inevitable collapse of FTX, the exchange’s internal balance sheet had liabilities of $15.6 billion.
Stay updated on how SBF’s trial went down in the first week:
Unpacking the SBF Trial, Highlights from the First Week
Read how SBF’s legal team countered the DOJ on Anthropic evidence:
SBF’s Legal Team Counters DOJ on Anthropic Evidence