FTX CEO Sam Bankman-Fried’s trial updates: Ex-girlfriend Caroline Ellison continues eye-opening testimony

Caroline Ellison's testimony took centre stage on 11 October in the continuing trial of Sam Bankman-Fried. Her revelations provide a unique look at the events leading up to the severe FTX crisis in November 2022.

For FTX the trouble started brewing in mid-June when lenders demanded Alameda Research to repay loans worth millions. This demand followed a significant market downturn in May. Ellison described the intense stress she faced during this period.

A staggering recall by Genesis Capital

One of the major lenders, Genesis Capital, recalled an astounding $500 million in loans. Ellison's revelations were based on chat messages between her, Bankman-Fried, and Genesis employees using Telegram.

Debt overload

Amid these pressures, Alameda Research found itself buried under a colossal debt load. According to Ellison, Alameda had amassed over $13 billion in debt from its credit line with FTX, coupled with open-term loans exceeding $1.3 billion. The financial burden was enormous.

Creative accounting tactics

In a bid to manage the financial crisis, Bankman-Fried adopted a unique approach. He instructed Ellison to find ‘alternative ways’ to present Alameda's financial status to lenders, with a specific focus on Genesis. Ellison believed that if Genesis discovered the actual financial situation, they might recall all loans, severely damage the company's reputation, and threaten its survival. She aimed to avoid this at all costs.

The spreadsheet saga

Ellison's testimony revealed a fascinating aspect of this financial ordeal. To navigate the crisis, she was tasked with creating multiple alternative spreadsheets for Genesis. These spreadsheets aimed to present Alameda's financial situation in a more positive light. One of these spreadsheets, sent to Genesis in June, listed total liabilities as $10.3 billion, a significant understatement compared to the actual amount, which was around $15 billion.

Surviving the financial storm

As the financial tempest raged on, Bankman-Fried had a survival strategy. Ellison unveiled that she had prepared a list titled ‘things Sam is freaking out about’ months before the FTX collapse.

This list included plans to secure capital from Mohammed bin Salman (MBS), the Crown Prince of Saudi Arabia. It also involved obtaining more capital from BlockFi, a company that had already lent Alameda over $660 million.

Additionally, Bankman-Fried sought to influence regulators to crack down on Binance as a means to expand FTX's market share.

A controversial allegation

In the midst of these revelations, Ellison mentioned a $150 million bribe that FTX allegedly paid to a Chinese official in 2021 to release frozen funds connected to a money laundering investigation.

This trial delves deep into the complexities of crypto trading and the financial intricacies that go with it. It offers a rare behind-the-scenes look at the challenges faced by Alameda Research during a critical period, where survival strategies were pushed to the limit.

Stay tuned to Web3Cafe for all the updates from the crypto trial of the century.