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Caroline Ellison: "I knew it was wrong"

The former head of Alameda Research told the court she had hidden financial statements with Sam Bankman-Fried.

By Mike Hesp
• 4 min read

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The former head of Alameda Research told the court she and Sam Bankman-Fried had hidden financial statements.

"I truly regret what I did — I knew it was wrong," Ellison told a judge at the U.S. District Court. That comes from a transcript of her December 19 hearing. The transcript was initially sealed until FTX founder Sam Bankman-Fried was "released" on a $250 million bail a few days later. Ellison is considered a key figure in the case surrounding the collapsed crypto exchange, along with Sam Bankman-Fried and FTX co-founder Gary Wang. Both Wang and Ellison have pleaded guilty. They also pledged to cooperate with authorities in the probe into what happened at FTX.

Ellison told the court that she, in coordination with Bankman-Fried, had filed "materially misleading financial statements" with Alameda's lenders. The court asked: "Did you also know it was illegal?" Ellison replied: "Yes."

The misleading records were "financial quarterly reports that concealed the extent of Alameda's loans and the billions of dollars in borrowings Alameda had taken on," Ellison said. "I agreed with Mr. Bankman-Fried and others not to disclose the true nature of the relationship between Alameda and FTX, including Alameda's lending arrangements."

The transcript was reviewed by The New York Times, Reuters and Bloomberg and separately published.

FTX and Alameda: suspicions confirmed

Ellison's statements confirm what many feared beforehand. Sam Bankman-Fried and his accomplices used customer funds from FTX to fund Alameda Research's loans. "I understood that if Alameda’s balances in a given currency on the FTX books were significantly negative, that meant Alameda was borrowing money that FTX customers had deposited on the exchange."

In court, Ellison admitted she was aware of these transactions. "I knew that FTX needed to use customer funds to finance its loans to Alameda."

Sam Bankman-Fried has not yet commented on the allegations. The 30-year-old is awaiting trial under house arrest at his parents' home, supervised by the FBI, after he was extradited to the U.S.. How Ellison's cooperation will affect any potential sentence remains to be seen: "I’m here today to take responsibility for my actions by pleading guilty," she concluded.

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