Caroline Ellison, the former chief executive officer of Alameda Research, arrived in court ahead of her testimony for the Sam Bankman-Fried trial, making her first public appearance since Alameda and FTX collapsed into bankruptcy a year ago.
(Bloomberg) — Caroline Ellison, the former chief executive officer of Alameda Research, arrived in court ahead of her testimony for the Sam Bankman-Fried trial, making her first public appearance since Alameda and FTX collapsed into bankruptcy a year ago.
Ellison arrived as Gary Wang, the co-founder of FTX, was under cross-examination by Bankman-Fried’s lawyers. Ellison, who was wearing a blue baseball cap and dark sunglasses, is scheduled to testify after Wang.
Prosecutors say she is one of the few people in Bankman-Fried’s inner circle who knows the truth behind the alleged siphoning of billions of dollars in FTX customer funds to the sister trading firm. She pleaded guilty and agreed to cooperate with federal prosecutors after FTX collapsed.
While being questioned by Bankman-Fried’s lawyers on the witness stand Tuesday, Wang testified about more than $200 million in loans he received from Alameda that were used to fund venture investments by FTX in 2021 and 2022. He said he also received $1 million to pay the interest on the loans. He said he used about $200,000 of that to buy a house on the island of St. Kitts.
Jurors were showed a promissory note for a $35 million loan in April 2022, signed by Ellison as CEO of Alameda. Wang testified the loans were structured and presented by FTX lawyers. He signed the notes without questioning how the loans were structured, he said.
Bankman-Fried’s team claim the involvement of lawyers in the transaction undercuts government claims that he was using Alameda to conceal FTX investments and spending.
Earlier Tuesday, Wang said that as late as June 2022, he was relieved that Alameda Research’s assets exceeded its liabilities and could repay lenders.
Wang was testifying for a third day at the trial of his former friend, Bankman-Fried. Later in the year, however, he questioned the notion that at least one calculation still showed that Alameda had a positive net asset value, shortly before both FTX and Alameda filed for bankruptcy.
“I’m not sure how accurate that was,” the 30-year-old Wang said in response to questions from Bankman-Fried’s lawyers.
Wang pointed out that some of Alameda’s assets included Serum and FTT that were fairly illiquid if sold at large quantities. He reiterated his testimony from last week and said that in fact Alameda’s debt to FTX was at least $8 billion.
Wang’s testimony goes to the heart of federal prosecutors’ case against Bankman-Fried. They accuse him of orchestrating a scheme to fraudulently transfer funds to Alameda, creating a massive shortfall that led to both companies’ bankruptcies. Wang is one of the government’s star witnesses, along with Ellison, who is also Bankman-Fried’s ex-girlfriend, and former FTX engineering chief Nishad Singh.
Wang, who pleaded guilty in December and agreed to cooperate with prosecutors, told the court last week that Bankman-Fried sent out a tweet assuring investors that the cryptocurrency exchange and its assets were in good shape, when in fact the company was in dire straits.
But Wang, who was wearing a gray suit and red tie, said Tuesday that in June 2022, at the beginning of precipitous drops in cryptocurrency prices, he was relieved that Alameda’s net asset value was positive and that it was able to repay investors who were seeking their money back.
Wang also testified Tuesday that he discussed FTX’s loans to Alameda with Bankman-Fried as early as 2019. Bankman-Fried told him that the loans were fine as long as Alameda’s total value was positive, including FTX’s self-invented digital currency, known as FTT.
“That made me think that it was maybe fine for Alameda to be borrowing funds,” Wang said.
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(Adds details on Wang testimony in fifth paragraph.)
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