Revelations in Court Trial Expose Deep Financial Woes Behind FTX Collapse
Summary:
The ongoing court trial of former FTX CEO, Sam Bankman Fried has revealed some shocking facts about the financial crisis of FTX, through the testimonies of ex-FTX and Alameda executives. General details uncovered include the inappropriate investments of Alameda which led to problems at FTX, FTX's plan to raise more finances to pay back its clients, and Alameda's back-door access to FTX customer funds. The revelations were made during a meeting held by Caroline Elisson, former Alameda Research CEO, prior to FTX's collapse.
The ongoing legal proceedings involving the former CEO of FTX, Sam Bankman Fried, have revealed a series of shocking details through the testimonies of previous FTX and Alameda Executives. The latest court session on October 12 featured the third day of testimony from Caroline Elisson, ex-CEO of Alameda Research. A recorded meeting from November 9, 2022, she hosted with Alameda staff members just preceding FTX's downfall was introduced to the jury following the testimony.
Conducted in Hong Kong with roughly 50% of Alameda's workforce in attendance, this meeting represented a crucial juncture at which Ellison openly discussed the situation at the cryptocurrency exchange to her team members. Along with these startling disclosures about the financial links between Alameda and FTX was provided.
A catalogue of four noteworthy aspects from the concealed recording, accessed by Cointelegraph, has been compiled. Problematic decisions at Alameda led to a financial emergency at FTX. Ellison unveiled to those present at the meeting that Alameda has been taking funds from FTX for a year, speaking about this early on. Alameda utilized these borrowed funds for a sequence of illiquid investments, she confessed.
A sudden market downturn initiated a call-in of Alameda's loans, which resulted in a deficit in FTX's financial holdings. Conversations from the recorded meeting suggest that Alameda's poor loans led to widespread fears surrounding FTX, encouraging users to withdraw their investments. FTX inevitably froze withdrawals to control the situation, resulting in the exchange's collapse within days.
Addressing an inquiry about how FTX planned to repay users from one of the attendees, Ellison revealed that the cryptocurrency exchange was considering further capital collection to bridge the financial gap. However, after the crash, finding willing investors proved challenging.
Christian Drappi, a former software engineer for Alameda and meeting attendee, expressed apprehension about Ellison's explanation to the court on Thursday, stating unawareness of cases where the investors indemnified the consumers due to the company's poor economic decisions.
Drappi also keyed out Ellison’s giggle during the discussions as she frequently does when oppressed, in response to a question from the employees about whose idea it was to offset Alameda’s loan deficits with FTX's customer funds during the clandestine recording's playback in the courtroom.
The topic of Alameda's back-door access to FTX was brought up by another employee, enquiring about the duration for which Alameda has utilized FTX customers’ funds to cover its financial shortcomings. Ellison responded by stating that FTX regularly allowed Alameda to borrow customer funds.
Published At
10/13/2023 11:11:35 AM
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