SBF Trial Day 5 – How Caroline Ellison’s testimony could become the smoking gun needed for a guilty verdict

The fifth day of the SBF trial included testimony from Alameda Research CEO Caroline Ellison, whose testimony became a pivotal point for the case as she confessed to committing fraud under SBF’s direction.

According to Ellison, SBF had instructed her to divert billions of dollars from FTX customer funds, which Alameda used for failed investments, to pay off its debt.

Her voice occasionally faltered as she discussed her late realization of Alameda’s financial distress and the subsequent schemes conceived by SBF to counter these losses. Among the shocking revelations, she shared SBF’s aspirations of becoming the U.S. President.

Ellison testifies on Alameda’s financial dealings

Ellison met SBF when they both worked at Jane Street — a renowned New York-based trading firm, and subsequently dated him for several years. SBF initially established Alameda Research and later inducted Ellison as its CEO.

In her testimony, Ellison recounted that SBF directed her to obtain several billion dollars from FTX customer funds as loans for Alameda to invest in various ventures. However, most of the investments failed and had to be written off.

Alameda then took more customer funds to the tune of $14 billion to clear its loans, which ultimately caused the exchange to collapse when customers began requesting withdrawals en masse.

Ellison also highlighted that she was oblivious to Alameda’s financial predicaments until joining the firm, after which SBF revealed strategies to mitigate these losses by mainly drawing funds from FTX.

Unbridled borrowing

Further details from Ellison’s testimony showcased that Alameda had been granted direct deposits ranging between $10-$20 billion from FTX in 2020 and 2022. From these, $2 billion was designated for repaying loans, investing, and converting capital to USDC.

Although Alameda ostensibly only required a credit line between $100 million and $200 million from FTX, there seemed to be no limit to their borrowing capacity. The timeline for returning this borrowed sum remained unclear to Ellison.

She also mentioned that Alameda possessed a significant amount of Solana — referring to them as “Sam coins” — and shed some light on the political donations made to Republicans and the Biden Regime.

Notably, SBF donated $10 billion to Biden’s administration, while Ryan Salame, CEO of FTX Digital Markets, borrowed $35 million from the exchange for contributions to the Republicans.

Ellison further told the court that SBF wanted to repurchase Binance’s FTX stocks in 2021 because he feared repercussions from the exchange’s CEO Changpeng ‘CZ’ Zhao if Alameda’s “special privileges” were discovered.

Ellison also accepted that she had forwarded “edited” balance sheets to FTX, which portrayed Alameda in a misleadingly low-risk light.

Wang delivers key insights on FTX operations

The courtroom’s attention shifted as Gary Wang, FTX’s CTO and Co-founder, took the stand. Defense lawyers Christian Everdell and Mark Cohen grilled Wang about the relationship between FTX and Alameda.

Wang detailed his surprise when SBF asked him to compute interest charges on Alameda’s borrowings.

He also highlighted his loan from FTX and how he used the funds. He explained FTX’s operations further, pointing out significant customer withdrawals and how Alameda transactions affected FTX’s balance.

Observers expect the trial to delve deeper into the financial ties between Alameda and FTX. Legal experts predict testimonies from industry experts to clarify crypto industry standards.

The defense will likely challenge Ellison’s statements, while the prosecution aims to reinforce her claims. As proceedings advance, the global crypto community keenly follows, understanding the trial’s broader implications for the industry.

In other news:

Alameda Research Accused of Minting Significant USDT Supply

Recent analysis by Coinbase director, Conor Grogan, suggests that the now-bankrupt crypto firm, Alameda Research, may have been responsible for creating nearly $40 billion of Tether’s USDT, representing about 47% of the stablecoin’s circulating supply.

This figure surpasses Alameda’s Assets Under Management (AUM) at the height of the crypto boom, according to data submitted by Sam Bankman-Fried (SBF), Alameda’s founder, to Forbes.

These revelations have garnered significant attention, especially in light of SBF’s ongoing criminal trial, which has shed light on dealings between Alameda and other firms. Despite the findings, Tether has refrained from commenting, citing its policy of not discussing customer transactions.

Venture Funding for Crypto Declines Amidst FTX Scandal

Venture capital investments in the cryptocurrency sector have plummeted 63% in the third quarter, marking the lowest level since 2020, as per PitchBook research.

The sharp decline in funding, amounting to just $2 billion, is believed to be associated with the ongoing legal battles surrounding FTX co-founder Sam Bankman-Fried (SBF) and his alleged mismanagement of the FTX cryptocurrency exchange.

This legal turmoil, coupled with FTX and its trading division, Alameda Research, navigating bankruptcy proceedings, has left the crypto industry apprehensive about its future. Robert Le, an analyst at PitchBook, remarked that bigger deals are now a rarity.