On Thursday, the jury from the Sam Bankman-Fried trial was exposed to a recording of the assembly Caroline Ellison held with Alameda employees in Hong Kong on November 9th, which happened as Alameda and FTX were beginning to collapse. During the meeting, Ellison commented: "FTX essentially and in general allowed Alameda to borrow user funds, or at least that is my knowledge."
At an all-hands meeting late on Nov. 9, 2022, 15 people from Alameda Research, Sam Bankman-Fried's crypto hedge fund -- 10 of them joining via video from the Bahamas -- sat in a circle to listen to CEO Caroline Ellison, who was in a beanbag. Former software engineer Christian Drappi was among them. His presence in a packed courtroom in Manhattan one Thursday -- as a government witness in the criminal trial against Bankman-Fried, whose potential sentence is life in prison for seven federal fraud charges to which he's pleaded not guilty -- was 11 months after Alameda and FTX (the crypto exchange operating across the street from Alameda) had gone bankrupt. Drappi had secretly recorded the meeting as audio and his testimony included the playback of several clips. He told the jury Ellison's demeanor was "sunken." She was "kinda slouching" and "did not display confident body language."Describing Alameda's use of borrowed money for investments that later went south, she said on the recording, according to Drappi, that the company would raise money to fill the hole. This caused Drappi to express concern in the courtroom, as it is not usual for outside money to be raised for this purpose. He asked if Alameda's loans had been collateralized through the spot margin group, and when she said they hadn't, Drappi proclaimed, "That seems pretty bad." He then asked if this was a "YOLO thing" -- an acronym for "you only live once," which he explained as "something that's spontaneous and not premeditated." Ellison responded with nervous laughter, as she often did. When asked whose idea it was to plug Alameda's loan losses with FTX customer money, she said, "Um, Sam, I guess," and giggled. She added, "FTX basically always allowed Alameda to, like, borrow user funds, as far as I know." Drappi resigned within 24 hours of the meeting..
Drappi began his employment at Alameda on May 31, 2021. Throughout the duration of his 18 month stay, he worked at their offices in Hong Kong, the Bahamas, and San Francisco. Prior to the business' demise, he was stationed in the Hong Kong office and recalled being located around 40 feet away from Bankman-Fried. On the odd occasion, the pair would meet up outside of work to play padel; a combination of tennis and squash. Drappi also highlighted Bankman-Fried's frequent use of Signal to maintain contact with Alameda staff, as well as his access to Alameda's internal data and back-end information.
At one point, he overheard a senior trader state, "Sam wanted to do it," in reference to a trade between Japanese bonds and the currency. Drappi proclaimed that he spoke to Alameda traders every day, and recalled that the night before the all-hands meeting of November 8th, he was in the office with Ellison alongside two traders, Tony Qian and David Nyeste. Bankman-Fried subsequently posted a tweet announcing that Binance was buying FTX, which created a sense of shock among those present.The agreement between Binance and FTX was non-binding, and it was eventually terminated. Two days after FTX declared bankruptcy, Caroline Ellison elaborated on Bankman-Fried's involvement in the management of Alameda.
Comments