Former Alameda CEO Caroline Ellison Exposes FTX’s Hidden Losses and Manipulated Balance Sheets
In a shocking turn of events, former CEO of Alameda Research, Caroline Ellison, provided damning testimony during the trial of Sam Bankman-Fried regarding the manipulation of balance sheets and concealment of losses at FTX. Her testimony shed light on the precarious state of Alameda Research’s finances and the deceptive practices employed by the company.
Key Takeaway
The trial of Sam Bankman-Fried reveals the extent of deception and manipulation employed by FTX and Alameda Research. The testimony of Caroline Ellison highlights the desperate measures taken to hide losses and deceive lenders, shedding light on the troubled state of the crypto trading firm’s finances.
The Turmoil in the Crypto Market and Alameda’s Desperate Situation
During May and June 2022, the collapse of Terra/LUNA sent shockwaves through the crypto market, causing widespread struggles and a decline in cryptocurrency values. It was during this volatile period that Ellison revealed the dire predicament Alameda Research found itself in. She admitted, “We were in a bad situation,” expressing concerns that if the truth were to be exposed, everything would come crashing down.
The Dishonest Balance Sheet and Hidden Risks
Ellison disclosed that a leaked balance sheet, reported on by CoinDesk, did not accurately reflect the true financial state of Alameda and FTX. The shared balance sheet, which was presented to lenders, was intentionally “dishonest” and “understated the true risk.” It was later revealed that FTX had modified the balance sheets to minimize leverage and risk, following Bankman-Fried’s directives.
Repaying Loans and Concealing the Truth
In an attempt to repay crypto lenders like Genesis, Alameda used FTX customer deposits, ultimately resorting to modifying balance sheets when lenders demanded to see them. Ellison attributed this deception to the dire situation Alameda was facing, wanting to prevent Genesis from recalling loans and avoid further scrutiny. She confessed, “I didn’t want to be dishonest, but also didn’t want to tell the truth.”
Alteration of Balance Sheets and Concealing Risks
Ellison disclosed that she prepared multiple balance sheets for Bankman-Fried using “alternative ways” to present their financial situation. The intention was to conceal unfavorable details that both Bankman-Fried and Ellison deemed to be detrimental. The motivation behind this manipulation was to portray a better financial picture to lenders, according to Ellison’s testimony.
The Alarming Level of Liabilities and Assets
Ellison revealed that in June 2022, Alameda Research had borrowed a staggering $9.9 billion from FTX customers, a clear indication of the risky position they were in. In addition to these borrowed funds, Alameda had open term loans of $1.8 billion and $2.9 billion in fixed term loans, categorizing them as long-term liabilities. The company’s liabilities reached approximately $12 billion, with only $3 billion in liquid assets, as per Ellison’s account.
As the trial continues, the revelations made by Caroline Ellison shed light on the intricate web of deceit and unsustainable financial practices that underpinned Alameda Research and FTX. The consequences of these actions leave investors, employees, and the crypto community reeling with the repercussions of the hidden truths that are now being exposed.
