Sam Bankman-Fried, co-founder of failed cryptocurrency trading platform FTX, deliberately misled clients, according to a former partner. Caroline Ellison, a senior executive at FTX-affiliated investment house Alameda Research, says she was aware of the fraud and had made arrangements with Bankman-Fried to cover it up.
Ellison previously pleaded guilty to the extensive fraud that led to FTX’s bankruptcy, according to the New York attorney’s office. That platform filed for bankruptcy after it didn’t have enough money to pay back users’ credits. That was in part because many of those funds had been surreptitiously loaned to Alameda Research, Ellison acknowledged, according to a transcript of his initial questioning.
Alameda
“From 2019 to 2022, I knew Alameda had access to a credit line from FTX.com and the cryptocurrency exchange run by Bankman-Fried,” Ellison said. He added that the investment fund he manages could essentially borrow unlimited amounts from FTX, without the investment fund having to post collateral or ever go bust. As a result, he knew that Alameda had funds from customers who knew nothing about it.
He also said he agreed with Bankman-Fried to keep this deal secret from lenders to FTX and to make false financial statements. This puts the FTX founder in a difficult position, as he has insisted in previous interviews that he has never deliberately deceived customers. With that, he suggested that the scandal surrounding the collapsed cryptocurrency exchange was mostly the result of lax governance on his part, rather than deliberate deception.
privileges
FTX co-founder Gary Wang also pleaded guilty and made incriminating statements to Bankman-Fried. He said he was tasked with modifying the FTX platform codes in order to grant Alameda certain privileges. Furthermore, the platform’s customers and investors were allegedly lied to. “I know what I did was wrong,” he said.
Bankman-Fried was flown from the Bahamas, where FTX’s headquarters are located, to New York on Wednesday night as the prime suspect in the large-scale fraud. He was arraigned Thursday on charges of misappropriating client funds, which US prosecutors say he invested in luxury real estate and campaign contributions for both the Democratic and Republican parties.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
