Bankman-Fried, FTX execs received billions in hidden loans, ex-Alameda CEO says

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NEW YORK (Reuters) – Sam Bankman-Fried and other FTX executives received billions of dollars in secret loans from cryptocurrency giant Alameda Research, former hedge fund chief says ) told a judge when he pleaded guilty to involvement in the exchange’s bankruptcy. .

Former Alameda Research CEO Caroline Ellison said Bankman-Fried and hedge funds would be able to borrow unlimited amounts from the exchange from FTX investors, lenders and customers. He said he agreed to hide it. Opened on Friday.

According to the records, Ellison told U.S. District Judge Ronnie Abrams in Manhattan federal court, “We are not aware of the scope of Alameda’s borrowings and the multi-billion dollar loans Alameda has made to FTX executives and associates. We have created a specific quarterly balance sheet that hides the range.” .

Both Ellison and FTX co-founder Gary Wang have pleaded guilty and are cooperating with prosecutors as part of a plea bargain. Their affidavits provide a preview of how two of Bankman-Fried’s former colleagues will testify against him as prosecution witnesses at trial.

At another hearing, also on December 19, Wang said he was instructed to change FTX’s code to give Alameda special privileges on its trading platform, while others said investors and customers had I was aware that Alameda said there was no such privilege.

The king did not specify who gave him those instructions.

Prosecutor Nicholas Roos said in court on Thursday that Bankman-Fried’s trial would include evidence from “multiple cooperating witnesses.” Roos said Bankman-Fried carried out a “magnificent fraud” that cost him billions of dollars in customer and investor funds.

Bankman-Fried admitted to failing to manage risk at FTX, but said he believed he did not face criminal charges. He has not yet filed a petition.

Bankman-Fried founded FTX in 2019 to ride the skyrocketing value of Bitcoin and other digital assets, becoming not only a billionaire but an influential contributor to US political campaigns. rice field.

FTX declared bankruptcy on November 11 after a flurry of customer withdrawals amid concerns about commingling FTX funds with Alameda in early November.

Bankman-Fried, 30, was released Thursday on $250 million bail. A spokesman for him declined to comment on Ellison and Wang’s statements.

Lawyers for Wang and Ellison declined to comment.

Ellison said in court that when she recalled a loan an investor made to Alameda in June 2022, she realized that her clients were unaware of the arrangement, and that she had to spend dozens of dollars in FTX client funds to repay them. He said he had agreed with others to borrow the billion dollars.

“I’m really sorry for what I did,” Ellison said, adding that he’s helping clients recover their assets.

Wang also said he knew what he was doing was wrong.

According to court records, Ellison’s hearing records initially suggested that disclosure of her cooperation could interfere with prosecutors’ attempts to extradite Bankman-Freed from the Bahamas, where he lives and is home to FTX. It was sealed out of concern that it might be sexually transmitted.

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

A judge ordered him to be confined to his parents’ California home pending trial.

Reporting by Luc Cohen, New York Writing by Tom Hals, Wilmington, Delaware Editing by Noeleen Walder and Matthew Lewis

Our standards: Thomson Reuters Trust Principles.

Luc Cohen

thomson Reuters

New York Federal Court Report. Previously worked as a correspondent in Venezuela and Argentina.

Tom Hulls

thomson Reuters

An award-winning reporter with over 20 years of experience in international news, he focuses on high-stakes legal battles over everything from government policy to corporate deals.

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