Sam Bankman-Fried associate apologises for defrauding FTX customers and admits she ‘knew it was wrong’

‘I want to apologise for my actions to the affected customers of FTX, lenders to Alameda and investors in FTX,’ Caroline Ellison said according to unsealed court transcript

Bevan Hurley
Monday 26 December 2022 18:07 GMT
FTX: Sam Bankman-Fried arrives back in US after extradition from Bahamas

The former CEO of Sam Bankman-Fried’s trading firm Alameda Research has apologised for defrauding investors and customers of the failed cryptocurrency exchange FTX.

Caroline Ellison, 28, told a judge that she was aware that executives were breaking the law as she entered a guilty plea in a Manhattan court last week, according to an unsealed transcript of her court appearance obtained by the Associated Press.

“I am truly sorry for what I did. I knew that it was wrong. And I want to apologise for my actions to the affected customers of FTX, lenders to Alameda and investors in FTX,” Ms Ellison said during the 19 December hearing.

FTX collapsed in November after it was revealed that several top executives had allegedly used billions of dollars in customer deposits to make risky trades through hedge fund Alameda Research, purchase luxury real estate and fund political campaigns.

Ms Ellison reportedly told Judge Ronnie Abrams that she and others allegedly went along with Mr Bankman-Fried’s decision to borrow several billion dollars from FTX to repay Alameda’s loans and conceal the close relationship between the two companies.

Mr Bankman-Fried, 30, was extradited to the US from the Bahamas on 21 December and has been released on $250m bail while awaiting trial.

In interviews prior to his arrest, the former billionaire apologised to out-of-pocket investors but said that he had not been aware of any fraudulent activity at either of his crypto firms.

Caroline Ellison has apologised for her role in the FTX collapse (Alameda Research / Twitter)

At her plea hearing, Ms Ellison said after FTX and Alameda collapsed in November, she had “worked hard to assist with the recovery of assets for the benefit of customers and to cooperate with the government’s investigation.”

According to a transcript obtained by the Associated Press, Ms Ellison said she understood that if Alameda’s FTX accounts had “significant negative balances in any particular currency”, it would mean that Alameda was borrowing customer money to make up the shortfall.

The Associated Press reported that she also admitted that FTX executives had received billions in hidden loans from Alameda.

“While I was co-CEO and then CEO, I understood that Alameda had made numerous large illiquid venture investments and had lent money to Mr. Bankman-Fried and other FTX executives,” she said.

FTX founder Sam Bankman-Fried leaving a New York courthouse after he posted $250m bail (Associated Press)

She and a second former FTX executive Gary Wang pled guilty to charges including wire fraud, securities fraud, and commodities fraud.

They are assisting prosecutors in their case against Mr Bankman-Fried, and have been released on $250,000 bail.

A judge agreed to a request by prosecutors to conceal the pair’s cooperation with authorities so that the cryptocurrency entrepreneur would agree not to fight extradition from the Bahamas to the United States, according to the court transcripts.

Mr Wang and Ms Ellison face a maximum of 110 years in prison and have reportedly been offered lenient sentences in exchange for their cooperation.

The pair are also facing civil charges from the Securities and Exchange Commission, who have described them as “active partcipants” in the conspiracy to defraud investors.

In a statement, the SEC said Mr Wang created the software code that allowed Alameda to divert FTX customer funds and Ms Ellison then used the misappropriated funds for Alameda’s trading activity.

A lawyer for Ms Ellison did not immediately respond to The Independent’s request for comment.

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