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Caroline Ellison, the former CEO of hedge fund Alameda Research and occasional partner to Sam Bankman-Fried, is expected to give testimony against him during his upcoming fraud trial on Tuesday, October 10. Bankman-Fried stands accused of misusing funds belonging to FTX customers for personal gain and engaging in high-risk trading practices.
Alameda’s Special Privileges
Ellison’s testimony will come after Gary Wang’s, the co-founder and former chief technology officer of FTX. Last December, Wang pleaded guilty to fraud charges. During his testimony on Friday, he revealed that Bankman-Fried instructed him to write code enabling Alameda to utilize $8 billion of FTX customers’ funds without their knowledge or consent.
Read Also: Adam Yadidie Testifies on FTX $8B Financial Hole
Wang added that Bankman-Fried desired special privileges for Alameda at FTX, including a negative balance capability and avoidance of liquidation. Trusting Bankman-Fried’s judgment, Wang followed with his instructions.
FTT Token Scandal
Wang testified that Bankman-Fried instructed Alameda to utilize FTX customers’ funds for purchasing FTT, the native token of FTX. Notably, FTT held no value beyond the exchange. According to Wang, Bankman-Fried’s intention was to enhance the price and popularity of FTT through artificial demand.
However, this strategy backfired in November 2022 when Alameda held billions of FTT as loan collateral. As a result, doubts arose regarding the stability and solvency of both FTX and Alameda, leading other investors (including Binance, a competitive crypto exchange) to engage in a massive sell-off of FTT.
Amidst the revelations, Binance’s CEO Changpeng Zhao, a major rival to FTX, announced that his company would divest its $50 million worth of FTT. Consequently, the value of FTT plummeted and clients of FTX hurriedly withdrew their funds, resembling a modern-day digital bank rush.
Ellison’s Upcoming Testimony Could Shift FTX Trial’s Course
So far, the trial has heard testimonies from two of Bankman-Fried’s colleagues: Zixiao (Gary) Wang and Adam Yedidia. Wang, who co-founded FTX and previously worked for Alameda Research, revealed that Alameda had certain advantages on FTX. Additionally, Wang acknowledged being aware of some market manipulation tactics employed by both FTX and Alameda.
Read Also: FTX Co-Founder Gary Wang Says Execs Lied About Alameda
Ellison will appear as a witness for the plaintiffs. Her testimony is anticipated to shed light on Bankman-Fried’s involvement in FTX and Alameda Research and their relationship with each other. It is likely that she will also disclose certain undisclosed information and scandals that transpired within Alameda Research during her role as CEO.
Ellison’s testimony holds significant weight in the case. It has the potential to either support or contradict the statements made by Wang and Yedidia. Additionally, her testimony may unveil new evidence or information that could implicate or clear Bankman-Fried of any wrongdoing.
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