NEW YORK, Dec 23 (Reuters) – Sam Bankman-Fried and other FTX executives received billions of dollars in secret loans from crypto mogul Alameda Research, a former head of a hedge fund told a judge. .
Carolyn Ellison, former chief executive of Alameda Research, said FTX agreed with Bankman-Fried that hedge funds could borrow unlimited amounts from investors, lenders and clients from the exchange. It was unsealed on Friday.
“We produced certain quarterly balance sheets that obscured the extent of Alameda’s debt and the billions of dollars in loans Alameda made to FTX executives and related parties,” Ellison told U.S. District Judge Ronnie Abrams in Manhattan federal court. .
Both Ellison and FTX co-founder Gary Wang pleaded guilty and are cooperating with prosecutors as part of their plea deals. Two of Bankman-Fried’s former associates offer a preview of how they may testify as prosecution witnesses against her.
Dec. In a separate plea hearing on the 19th, Wang said he was ordered to make changes to FTX’s index to give Alameda special privileges on the trading floor, knowing others were telling investors and clients that Alameda had no such privileges.
Wang did not specify who gave him those instructions.
Nicholas Roos, a lawyer, told the court Thursday that Bankman-Fried’s trial will include evidence from “various cooperating witnesses.” Rouse said Bankman-Fried committed “fraud of epic proportions” that led to the loss of billions of dollars in customer and investor funds.
Bankman-Fried admitted to risk management failures at FTX, but said he did not believe he was criminally responsible. He has yet to file a plea.
Bankman-Fried founded FTX in 2019 and became a multi-billionaire and an influential donor to US political campaigns thanks to the boom in the values of Bitcoin and other digital assets.
A flurry of customer withdrawals amid concerns about the merger of FTX Funds with Alameda in early November prompted FTX to file for bankruptcy on November 11.
Bankman-Fried, 30, was released Thursday on $250 million bond. A spokesman for Ellison and Wang declined to comment on the reports.
Lawyers for Wang and Ellison declined to comment.
Ellison told the court that when investors recalled loans to Alameda in June 2022, FTX agreed with others to loan billions of dollars in customer funds, understanding that customers were unaware of the arrangement.
“I’m truly sorry for what I did,” Ellison said, adding that he was helping clients recover property.
Wang also said that he knew what he was doing was wrong.
The transcript of Ellison’s trial was initially sealed, court records show, out of concern that revealing his cooperation could thwart prosecutors’ efforts to extradite Bankman-Fried from the Bahamas, where he lived and where FTX was based.
Bankman-Fried was arrested in the capital Nassau on December 12 and arrived in the US on Wednesday after agreeing to extradition.
A magistrate judge ordered him confined to his parents’ California home pending trial.
On Friday evening, Abrams recused herself from the case, according to a court order, and the law firm Davis Polk & Wardwell LLP, in which her husband is a partner, advised FTX in 2021.
The firm also represented parties adverse to FTX and Bankman-Fried in other proceedings, and while her husband had no involvement in the matters, she said, “are confidential and their substance is unknown to the court.” She recused herself to avoid a possible confrontation.
Reporting by Luke Cohen in New York; By Tom Halls in Wilmington, Del.; Editing by Nolene Walter, Matthew Lewis and Daniel Wallis
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