Binance CEO's Tweet Partly Responsible for FTX’s Collapse, Says Former Alameda Research CEO
Summary:
In a recent court testimony, former Alameda Research CEO, Caroline Ellison, blamed a single tweet by Binance CEO, Changpeng Zhao, for partly causing the downfall of cryptocurrency exchange FTX. According to Ellison, Zhao's tweet about liquidating FTX Token (FTT) led to widespread panic and subsequent withdrawal of funds from FTX, leading the platform to halt withdrawals and file for bankruptcy. This all unfolded during Sam Bankman-Fried’s criminal trial, where Ellison also revealed that the main reason for FTX's collapse was Alameda borrowing $10 billion that it couldn't repay.
Former CEO of Alameda Research, Caroline Ellison, has testified that a single tweet from Binance's CEO, Changpeng Zhao, known as CZ, played a role in the downfall of the cryptocurrency exchange platform FTX. During Sam "SBF" Bankman-Fried's criminal trial on October 12, Ellison reportedly cited CZ's Twitter post as partially responsible for FTX's crash. In the infamous November 6, 2022 tweet, CZ revealed that Binance would be liquidating its FTX Token (FTT) possessions in response to recent discoveries.
Binance took on approximately $2.1 billion USD worth in cash, in the form of both BUSD and FTT, as part of its departure from FTX equity last year, deciding to liquidate remaining FTT assets after revelations came to light. Upon liquidation, many accounts suggest retail investors mimicked Binance's move and withdrew capital from FTX, leading to the platform's stoppage of withdrawals and filing for bankruptcy on November 11.
While Ellison maintains that CZ's tweet influenced FTX's fall, she identifies the primary cause as Alameda taking out a $10 billion loan from FTX, which the firm was unable to repay. In SBF's trial, she testified on October 10 that Bankman-Fried instructed her to have Alameda extract billions from FTX without user approval.
CZ, however, refuted the accusations that his tweet led to FTX's downfall in a December 6 Twitter thread, arguing "no healthy business can be destroyed by a tweet". He directed attention to Ellison's own Twitter activity on November 6, which proposed Alameda's willingness to purchase Binance's FTT assets as the real trigger for the sell-off of the tokens.
The court testimonial offered by Ellison, the former CEO of Alameda, included revealing Bankman-Fried's presidential aspirations, the creation of multiple "alternative" financial spreadsheets for Genesis, and SBF's consideration of Saudi Crown Prince Mohammed bin Salman as a potential exchange backer. Cross-examination by defense lawyer Mark Cohen appeared to focus on Bankman-Fried's understanding of Alameda's actions.
Ellison's indication that Bankman-Fried may not have known about FTX customers' funds being at risk was met with skepticism by Assistant U.S. Attorney Danielle Sassoon, who labeled the claim as "vague". During SBF's criminal trial, which kicked off on October 3, Ellison appeared in court on the seventh day. As one of the initial FTX and Alameda insiders to plead guilty, she agreed to provide her statement in return for a deal with U.S. officials.
Bankman-Fried, who is currently contesting seven criminal charges, has declared his innocence in his initial trial, which is anticipated to last throughout November. He is set to confront an additional five charges in a trial slated for March 2024.
Published At
10/12/2023 9:00:00 PM
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