Tech

SBF: Of Chinese bribes, altering balance sheets, and duping FTX users

10/12/2023
Bitcoin Ethereum News


  • FTX bribed Chinese officials to unfreeze $1 billion, Ellison said in today’s (11 October) hearing
  • The former Alameda head claimed that Sam had led her to lie multiple times

Today (11 October) marks the second day of former Alameda CEO – Caroline Ellison’s testimony in court. Ellison dwelled deeper into Sam Bankman-Fried’s web of lies that held FTX — now a bankrupt crypto exchange together for years.

In yesterday’s (10 October) hearing, the former executive admitted that FTX’s customer funds were used to buy back Binance’s stake. According to her, SBF took the decision as he was worried that its competitor “would cause trouble”.

Billions of FTX customer funds drained

As per Inner City Press, in today’s hearing, she dwelled deeper into the events that happened before the exchange witnessed a bank run. Topics of accounting fraud, Chinese bribes, and Saudi Prince – Mohammed bin Salman (MBS) surfaced during the testimony hearing.

The hearing started with Ellison speaking about Alameda’s financial situation with the cryptocurrencies facing a bear market. Ellison stated that during the market downturn, its financial partners started recalling loans. And, this was possible as they open-ended loans, a type of loan that does not have a definite end date.

She further claimed that Genesis Trading — a now bankrupt crypto lending firm and a subsidiary of DCG — was among the firms recalling the loan. Ellison said that the money “would have to be taken from FTX” to honor this demand. She announced that Bankman-Fried directed her, Nishad Singh, and Gary Wang to repay Alameda’s loan with FTX’s customer funds.

Furthermore, Genesis’ head of lending had demanded to see the balance sheets of Alameda. However, the firm could not present an actual one as it would reflect the FTX borrowings and the loans given to the executive. To tackle this, Ellison “prepared seven balance sheets,” with Sam eventually selecting a sheet that omitted $9.9 billion owed to FTX customers.

By September 2022, all $13 billion was taken by Alameda. But, at some point, Ellison said that they had believed they would raise capital by selling equity for their firm, and one of the prospective investors was the Saudi Crown Prince – MBS. She also said,

Frozen funds and the fall of FTX 

The testimony also shed light on previously unknown facts. One such thing was the large bribe given to Chinese government officials. The firm resorted to this action as nearly a billion dollars was frozen in China due to a money laundering investigation. In November 2021, the crypto firm poured out a total of $150 million to retrieve the frozen funds.

Fast forward to the fall of FTX in November 2022, the Alameda CEO said that the withdrawals began as FTT was tumbling in the market. Furthermore, she felt that it was right around this time that she and Nishad Sigh, a co-executive at FTX began saving messages. Prior to this, Sam had set a one-week of auto-deletion for conversations taking place on Signal.

Additionally, Ellison recalled being terrified by the large withdrawals. Additionally, upon being asked if withdrawals could be met, Sam lied saying “We can meet a ton.” Furthermore, to stop customers from panic withdrawing, Sam drafted a message, which was ultimately posted on Ellison’s Twitter (X) handle.

Alameda’s CEO Ellison responded to Binance’s CEO CZ’s tweet about selling their FTT. She stated that they would directly buy FTT from Binance for $22 per coin, in order to call CZ’s “bluff”. She further said,

“AUSA: When did you meet with the FBI and prosecutors?
Ellison: December 2022.
AUSA: What had happened?
Ellison: The FBI searched my parents’ home, took my phone and computer and journal.
AUSA: What info did you provide?
Ellison: The crimes we had committed.”

Source: https://ambcrypto.com/sbf-of-chinese-bribes-altering-balance-sheets-and-duping-ftx-users/