Bankman-Fried, FTX execs received billions in hidden loans, ex-Alameda CEO says

NEW YORK, Dec 23 (Reuters) – Sam Bankman-Fried and other FTX executives have received billions of dollars in secret loans from the crypto tycoon’s Alameda Research, the former fund chief said speculation to a judge when she pleaded guilty to her role in the collapse of the exchange. .

Caroline Ellison, former managing director of Alameda Research, said she agreed with Bankman-Fried in hiding from FTX investors, lenders and customers that the hedge fund could borrow unlimited amounts from the exchange, according to a report. transcript of his December 19 plea hearing which was unsealed on Friday.

“We prepared certain quarterly balance sheets that hid the extent of Alameda’s borrowings and the billions of dollars in loans that Alameda had made to FTX executives and related parties,” Ellison told U.S. District Judge Ronnie Abrams. in Manhattan federal court, according to the transcript. .

Ellison and FTX co-founder Gary Wang have both pleaded guilty and are cooperating with prosecutors in their plea deals. Their affidavits offer insight into how two of Bankman-Fried’s former associates might testify at trial against him as prosecution witnesses.

In a separate plea hearing, also on December 19, Wang said he was instructed to make changes to FTX’s code to give Alameda special privileges on the trading platform, while being aware that others were telling investors and customers that Alameda had no such privileges.

Wang did not say who gave him these instructions.

Nicolas Roos, a prosecutor, said in court Thursday that Bankman-Fried’s trial would include evidence from “several cooperating witnesses.” Roos said Bankman-Fried committed a “fraud of epic proportions” that resulted in the loss of billions of dollars in client and investor funds.

Bankman-Fried acknowledged failures in risk management at FTX, but said he did not believe he had criminal liability. He has not yet entered a plea.

Bankman-Fried founded FTX in 2019 and rocketed the values ​​of bitcoin and other digital assets to become a multi-billionaire as well as an influential contributor to US political campaigns.

A wave of client withdrawals in early November amid concerns about FTX funds mixing with Alameda prompted FTX to file for bankruptcy on November 11.

Bankman-Fried, 30, was released Thursday on $250 million bail. His spokesperson declined to comment on Ellison and Wang’s statements.

Lawyers for Wang and Ellison declined to comment.

Ellison told the court that when investors in June 2022 recalled the loans they had made to Alameda, she agreed with others to borrow billions of dollars in FTX client funds to repay them, knowing that the clients were unaware of the arrangement.

“I’m so sorry for what I did,” Ellison said, adding that she was helping recover client assets.

Wang also said he knew what he was doing was wrong.

The transcript of Ellison’s hearing was initially sealed over fears that disclosing his cooperation could thwart prosecutors’ efforts to extradite Bankman-Fried from the Bahamas, where he lived and where FTX was based, according to court records.

Bankman-Fried was arrested in the capital Nassau on December 12 and arrived in the United States on Wednesday after consenting to extradition.

A judge ordered that he be confined to his parents’ California home until trial.

Reporting by Luc Cohen in New York Writing by Tom Hals in Wilmington, Del. Editing by Noeleen Walder and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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