The FTX co-founder and Alameda CEO didn’t hold back at SBF’s trial (Chain Reaction)
Oct 14, 2023
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"Equity" features Gary Wang, CTO of FTX, and Caroline Ellison, CEO of Alameda, as they testify in Sam Bankman-Fried's trial. They discuss the downfall of FTX, fraudulent practices at the company, and the outrageous story of Alameda bribing Chinese officials. The podcast also explores the challenges faced by startups, the use of customer funds by FTX and Alameda, and the increasing line of credit that led to FTX's bankruptcy filing. The defense's performance in cross-examining witnesses is discussed, with anticipation for more investor-related testimonies.
The downfall of FTX and Alameda was linked to a collapse in the crypto market and demands from lenders for their money back, revealing a problematic financial situation with Alameda having special privileges of massive lines of credit and unlimited withdrawals.
Caroline Ellison's testimony exposed the fraudulent modification of Alameda's balance sheets in 2022 to conceal risk associated with FTX deposits, indicating a motive to present a better financial position to lenders and showcasing trust between SPF and Ellison.
Deep dives
Witness Testimony on Downfall of FTX and Alameda
During the second week of the Sam Bankman free trial, major witnesses including Gary Wong, CTO and co-founder of FTX, and Caroline Ellison, CEO of Alameda, pled guilty to multiple counts and cooperated with the prosecution. Their testimonies revealed that the downfall of FTX and Alameda was linked to a collapse in the crypto market and the demands of crypto lenders for their money back. Wong also exposed how Alameda had special privileges with massive lines of credit and unlimited withdrawals, indicating a problematic financial situation.
Fraudulent Balance Sheets and Bribery Attempts
Caroline Ellison's testimony unveiled the fraudulent modification of Alameda's balance sheets in 2022 to conceal the risk associated with the deposits taken from FTX customers. This fraudulent effort was aimed at presenting a better financial position to lenders. Additionally, Ellison testified about Alameda's attempt to bribe Chinese officials to unlock trading accounts that were frozen. Although this bribery charge is not part of the case, it showcases the trust and motive between SPF and Ellison.
Upcoming Witnesses and Defense Struggles
Upcoming witnesses in the trial include Zach Prince, founder of BlockFi, and various investor-related witnesses. The defense has faced challenges in cross-examining witnesses, particularly with Caroline Ellison's frequent use of 'don't recall' responses. It remains to be seen how the defense will navigate the proceedings, but their initial performances have been questioned.
This week, we have a bonus mini episode where Jacquelyn talks with TechCrunch+ editor-in-chief Alex Wilhelm to dive back into the Sam Bankman-Fried trial and what has transpired in its second week.
Major witnesses who were involved in the downfall of FTX and its sister company Alameda testified like Gary Wang, CTO and cofounder of FTX, and Caroline Ellison, CEO of Alameda.
The two of them plead guilty to a number of charges and could face maximum sentences of 50 to 110 years, respectively. It’s also worth noting Wang and Ellison testified as part of a cooperation agreement for pleading guilty.
Jacquelyn and Alex talk about key points from the trial, anecdotes that you can’t read on a transcript and what she anticipates from both the prosecutors and defense going forward.
Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products.
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