A 75-minute audio clip secretly recorded by Caroline Ellison reveals the exact moment 15 former Alameda Research staff members learned the trading company was “borrowing” user funds from FTX.
A full-length recording obtained by Cointelegraph provides new insight into the palpable tension felt by Ellison and Alameda staff in the lead up to FTX’s collapse.
“Alameda had borrowed large sums of money through perpetual loans and utilized them in various illiquid investments, i.e. things like FTX and a bunch of FTX U.S. stocks. […] Most of Alameda’s loans were called in response to recalls,” Ellison explained at an all-hands meeting in Hong Kong on November 9, 2022.
“We ended up borrowing a large amount of money from FTX, which resulted in FTX running out of user funds.”
“[FTX] “Basically Alameda has always allowed users to borrow their funds,” she added, speaking to the 15 or so staff members who attended the meeting.
A portion of the audio recording of the meeting was also played in court on the eighth day of Sam Bankman Freed’s criminal trial on Oct. 12, which was accompanied by witness testimony from former Alameda software engineer Christian Drappi. It was part of.
Mr. Drappi appeared on the witness stand just after Mr. Ellison had testified for nearly three days. Prior to the meeting, Drappi and many other Alameda employees are understood to have been unaware that the hedge fund was allegedly using FTX customer deposits to support trading activity.
In the recording, Ms. Drappi can also be heard asking Ellison when he realized Alameda was misusing FTX users’ deposits and who at the company knew about it.
At first, Ellison avoided answering, but Drappi pressed again.
“I don’t think this is a YOLO issue, do you?”
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According to court reports from the trial, the playback of this audio led to one of the most humorous moments in court. Drappi said he had to explain the term “YOLO” to everyone in attendance and wanted Ellison to confirm the use of “YOLO.” Depositing into FTX was not just a “spontaneous” decision.
Drappi said in his testimony that Ellison’s behavior at the meeting was “depressed” and that he did not show much confidence in Alameda employees. He said he was “dumbfounded” to learn the extent of FTX’s relationship with Alameda and quit the next day.
Alameda Research engineer Aditya Bharadwaj, who was also present at the meeting, told Cointelegraph that Ellison provided a wealth of new information “that was never discussed internally,” including acquisitions that were later abandoned. He said that the audience was “very nervous” as a result of this disclosure. The acquisition of FTX by its largest competitor at the time, Binance.
“It became clear that there was no future for the company and that we all had to leave. And we did that shortly after,” Bharadwaj said.
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