During a Secret Recording obtained by prosecutors, Caroline Ellison, the former CEO of Alameda Research, has revealed details of financial impropriety within the organization and its affiliate, FTX.

Ellison’s candid confession occurred during a biweekly “all-hands” meeting held on November 9, 2022, at Alameda Research’s Hong Kong office, just two days before FTX declared bankruptcy.

Former Alameda CEO Drops Bombshell at Meeting

At the start of the meeting, Ellison, who had recently stepped down as CEO, began by saying, “I guess I’ll just start by saying some stuff.” What followed was a revelation that sent shockwaves through the crypto industry. According to the recorded audio, Ellison alleged that Sam Bankman-Fried, the founder of both Alameda and FTX, had used FTX customer funds to repay loans.

The secret recording, made by an employee who had been with the company for only three days, became a pivotal piece of evidence in the ongoing legal proceedings.

The government introduced the snippets of the recording during the questioning of Christian Drappi, a former Alameda employee who had provided the audio to prosecutors. The recorded confession starkly contrasted Ellison’s earlier, more subdued testimony during cross-examination by Bankman-Fried’s defense team.

After the conclusion of Ellison’s cross-examination, Drappi took the witness stand. Drappi had been an Alameda developer for over a year and was unaware of Bankman-Fried’s alleged conspiracy to withdraw customer funds from FTX until one night in November.

X Post Reveals FTX’s Troubling Financial Situation

On November 8, 2022, at around 11 p.m., Tony Qian, Drappi’s colleague, came across a tweet from Bankman-Fried announcing a “strategic transaction with Binance for FTX.com.” Standing alongside Drappi and Ellison in the Hong Kong office, Qian sought confirmation from Ellison.

She acknowledged the announcement and disclosed that FTX had used Alameda funds to cover a shortfall in user funds, primarily for repaying billions of dollars in loans. Drappi testified that he was “utterly shocked” by this revelation.

During a regular biweekly meeting with Alameda staff the following day, Ellison came clean about the situation. According to Drappi, she appeared visibly distressed, sitting on a beanbag chair and sounding quiet and matter-of-fact as she explained, “Alameda borrowed a bunch of money to make illiquid investments… We ended up, like, borrowing a bunch of funds from FTX.”

Inevitably, staff members had questions, including Drappi. He pressed Ellison to reveal who else within Alameda or FTX was aware of the withdrawal of customer funds. Eventually, Ellison disclosed that Sam Bankman-Fried, herself, Gary Wang, and Nishad Singh, all of whom had since agreed to plea deals, were in the know.

Featured Image Courtesy of The Daily Beast