Caroline Ellison, erstwhile girlfriend of FTX founder Sam Bankman-Fried and former CEO of Alameda Research, has spilled her guts in order to avoid a 110 year prison sentence.
According to court documents released Friday, Ellison admits she and SBF signed off on “materially misleading financial statements” for Alameda lenders - knowing it was illegal.
“I am truly sorry for what I did,” she said, according to the transcript of the hearing, adding “I knew that it was wrong.”
OK - on #FTX / Alameda, here now the unsealed guilty plea transcript of Caroline Ellison - it was held in secret, and not docketed until today, once Bankman-Fried was freed on $250 mln bond. Thread then stories on https://t.co/3AcCBJNU41 and pic.twitter.com/Ptd0L1u9oL— Inner City Press (@innercitypress) December 23, 2022
Specifically, she told a judge earlier this week she and Bankman-Fried conspired to steal billions of dollars from FTX customers, as she appeared in federal court to plead guilty to seven criminal counts, according to a court transcript reported by Wall Street Journal and Bloomberg.
“I understood that FTX executives had implemented special settings on Alameda's FTX.com account that permitted Alameda to maintain negative balances in various fiat currencies and crypto currencies,” said Ellison.
“In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having to pay interest on negative balances and without being subject to margin calls or FTX.com’s liquidation protocols.
“If Alameda's FTX accounts had significant negative balances in a particular currency, it meant that Alameda was borrowing funds that FTX's customers had deposited onto the exchange.”
Ellison’s statement included allegations that Bankman-Fried and other FTX executives had borrowed funds from Alameda, and used FTX funds to repay “loans worth several billion dollars."
Ellison’s plea deal, released on Dec. 21, largely spared the former Alameda CEO of many of the charges Bankman-Fried currently faces including wire fraud and securities fraud. She may still be prosecuted for criminal tax violations, but the agreement set bail at $250,000 on the condition she surrendered all travel documents.
FTX’s co-founder and former CTO Gary Wang confirmed the existence of these privileges and that Alameda was an exclusive beneficiary of them.
Of course, this crushes Bankman-Fried's 'Simple Jack' defense...
As Decrypt reports, the code’s existence, previously called a sort of bookkeeping “backdoor,” was first reported by Reuters, citing anonymous sources. Bankman-Fried said later that “that is definitely not true,” adding that he didn’t “know exactly what they’re [Reuters] referring to.”
It now appears that this code indeed existed and offered Alameda some serious benefits.
...but even more notably, a judge agreed to a request by prosecutors to keep it secret that two of Bankman-Fried’s executive associates had turned against him so that the cryptocurrency entrepreneur would agree not to fight extradition from the Bahamas to the US, according to the transcripts.
And now he's on his way, via Business Class, to his mom-and-dad's fancy Palo Alto pad...
SBF en route to his parents’ house. Beanie is an excellent disguise, ser. pic.twitter.com/NHZ8uZg24a— Tiffany Fong (@TiffanyFong_) December 23, 2022
...for some me-time.