Bankman-Fried, FTX executives took billions in secret loans, former Alameda CEO says

Bankman-Fried, FTX executives took billions in secret loans, former Alameda CEO says
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New York, December 23 (Reuters) Sam Bankman-Fried and other FTX executives received billions of dollars in secret loans from crypto tycoon Alameda Research, a former hedge fund executive told a judge as he admitted his role in the stock market crash.

Caroline Ellison, the former chief executive of Alameda Research, said in a Dec. 2 transcript that he agreed with Bankman-Fried to keep FTX hidden from its investors, creditors and customers. 19 hearings opened on Friday.

“We produced certain quarterly balance sheets that concealed the extent of Alameda’s debt and the billions of dollars owed by Alameda to FTX executives and related parties,” Ellison told US District Judge Ronnie Abrams in Manhattan federal court. .

Ellison and FTX co-founder Gary Wang have both pleaded guilty and are cooperating with prosecutors as part of their plea deals. Their sworn statements offer a glimpse into how two of Bankman-Fried’s former co-conspirators could testify against her in court as witnesses for the prosecution.

In a separate lawsuit, also in December. On the 19th, Wang said he instructed Alameda to amend the FTX code to grant special privileges on the trading platform, while being aware that others were telling investors and customers that Alameda did not have such privileges.

Wang did not specify who gave him these directions.

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

Bankman-Fried admitted to risk management failures at FTX, but said he did not believe he was criminally responsible. He has not filed a motion yet.

Bankman-Fried founded FTX in 2019 and walking boom becoming a multi-billionaire in the value of bitcoin and other digital assets, as well as being an influential donor to US political campaigns.

A flurry of customer withdrawals in early November prompted FTX to file for bankruptcy in November amid concerns about the merger of FTX funds with Alameda. 11.

Bankman-Fried, 30, was released on Thursday 250 million dollars Well His spokesman declined to comment on Ellison and Wang’s statements.

Attorneys for Wang and Ellison declined to comment.

Ellison told the court that when investors called back on their loans to Alameda in June 2022, he and others agreed to borrow billions of dollars from FTX client funds, realizing that clients were unaware of the arrangement.

“I truly regret what I did,” Ellison said, adding that he helped recover client assets.

Wang also said he knew what he was doing.

Court records show that the transcript of Ellison’s hearing was initially sealed because prosecutors were concerned that revealing his cooperation could hinder extradition efforts from the Bahamas, where Bankman-Fried lives and where the FTX is based.

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

A judge ordered him to stay at his parents’ home in California until his trial.

On Thursday, Abrams recused herself from the case, saying in a court order that her husband’s partner, Davis Polk & Wardwell LLP, advised FTX in 2021.

The judge said the firm had also represented parties that could have adversely affected FTX and Bankman-Fried in other proceedings, and while her husband had no involvement in those matters, which were “confidential and not known to the Court,” she recused herself to avoid a possible conflict. does.

Reporting by Luc Cohen in New York; by Tom Hals of Wilmington, Del.; Edited by Noeleen Walder, Matthew Lewis and Daniel Wallis

Our standards: Thomson Reuters Trust Principles.

Luc Cohen

Thomson Reuters

Reports on New York federal courts. Previously, he worked as a reporter in Venezuela and Argentina.

Tom Hals

Thomson Reuters

Award-winning reporter with more than two decades of experience in international news, focusing on high-stakes legal battles on everything from government policy to corporate deals.

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