More details have emerged, throwing light on the extents of the financial fraud committed by crypto fraudster Sam Bankman-Fried and his associates. Caroline Ellison, the alleged girlfriend of the con artist reportedly told the investigators on Friday that executives at FTX including SBF were given billions of dollars in secret loans from Alameda Research, the hedge fund that she headed. The revelation was part of her guilty plea even as Bankman-Fried secured a bail on a massive $250 million.
In her confession, Ellison also said she was aware that her actions in collusion with Bankman-Fried amounted to willfully hiding the illegal loan transaction from FTX investors, lenders and customers.
"We prepared certain quarterly balance sheets that concealed the extent of Alameda's borrowing and the billions of dollars in loans that Alameda had made to FTX executives and to related parties," Ellison said, according to court filings.
The revelations by Ellison could tighten the noose around SBF's neck even as he waits trial on multiple charges. In addition to Ellison, FTX co-founder Gary Wang has also flipped, admitting that the violations at FTX were committed with the direct knowledge of the stakeholders at the top echelons. Both Wang and Ellison have been charged with roles in the frauds that contributed to FTX's collapse. In a clear admission of the guilt, Wang testified that he was 'directed' to make changes to FTX's code. The charge, which actually points the finger to SBF, shows that SBF and his close associates gave Alameda special privileges on the trading platform ans siphoned off customer assets.
Prosecution Witness Against SBF?
Both Wang and Ellison are expected to be prosecution witnesses in the trial of SBF. According to prosecutor Nicolas Roos, evidence from multiple cooperating witnesses will be a key part of the trial of Bankman-Fried. The prosecutor said Bankman-Fried carried out a "fraud of epic proportions" that led to the loss of billions of dollars of customer and investor funds, according to Reuters.
Preceding the collapse of the exchange, Bankman-Fried transferred $10 billion from FTX to his trading company Alameda Research. A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion, the report said, according to Reuters.
The FTX collapse started when some investors recalled loans they had made to Alameda in June 2022. The FTX associates started rerouting billions of dollars in FTX customer funds to stop the gap, but held the customers in the dark even as they engaged in fraudulent fund transfer.
However, a flurry of customer withdrawals followed, on suspicion that FTX funds had been flowing into Alameda Research. The outflow breached a critical threshold in November, forcing FTX to declare bankruptcy on November 11.