Caroline Ellison's latest testimony: Bribing Chinese officials to unlock $1 billion accounts, SBF once hoped to sell FTX shares to the Saudi Crown Prince

Author: BitPush

Bribing Chinese Officials to Regain $1 Billion Forex Accounts

Ellison stated that the cryptocurrency trading company had "made large bribes" to Chinese officials to unlock its Alameda trading accounts on OKX and Huobi in China. Ellison mentioned that at the time, Alameda's $1 billion in funds were frozen on the cryptocurrency exchanges OKX and Huobi. The exchanges informed Alameda that this was part of a money laundering investigation involving a person trading with Alameda.

According to Ellison, this $1 billion represented a significant portion of Alameda's assets at that time. Bankman-Fried, along with Ellison, FTX co-founder Gary Wang, FTX engineering chief Nishad Singh, FTX COO Constance Wang, and two other employees held multiple meetings regarding the bribery matter. She said that Constance Wang and the other two employees had connections in China, with one employee's father being a government official. Alameda hired a lawyer to negotiate with the Chinese government, but was unsuccessful.

They then attempted to transfer funds through trading, but were unsuccessful. Ultimately, after Ellison made a "cryptocurrency transfer" of about $100 million to $150 million to the accounts, they were reopened to Alameda, although she was "not sure who" was responsible. It was later revealed that these accounts were linked to Chinese officials.

When asked during the review why she did not write down that the $150 million was a payment to Chinese officials, Ellison stated that she "did not want to put in writing that we paid to unlock the accounts, as it could leak and be detrimental in court cases."

Preparing 7 Balance Sheets to Conceal Billions in Loans

In her testimony, Ellison described what she and SBF did before meeting with Matt Ballensweig, co-head of trading and loans at the crypto lending firm Genesis, who requested updated information on Alameda's balance sheet. SBF allegedly asked former Alameda Research CEO Caroline Ellison to come up with different ways to conceal billions of dollars in loans on Alameda Research's balance sheet. Ellison stated that among seven alternatives, SBF chose the option of not disclosing the $9.9 billion owed to FTX customers, aiming to make Alameda appear less risky.

Ellison said, "Sam (SBF) said not to send the balance sheet to Genesis. We borrowed $10 billion from FTX and provided $5 billion in loans to our own executives and affiliated entities. We thought Genesis might share this information."

Ellison added, "He asked me to come up with other options to present the information. He wanted me to hide some things on the balance sheet. So I prepared seven different balance sheets. I didn’t want to lie, but I presented other options to Sam for him to decide."

According to court testimony, this incident occurred on June 19, 2022.

SBF Wanted to Sell FTX Stake to Saudi Crown Prince to Raise Funds

In mid-June 2022, Ellison shared the latest balance sheet with SBF, describing this period as "a crisis time for Alameda."

She estimated that at that time, Alameda had borrowed about $13 billion from FTX customers, in addition to $1.3 billion in term loans from third-party lenders like Genesis. About $3 billion borrowed from FTX was still stored on the cryptocurrency exchange.

Ellison said, "I knew he was telling me to borrow money from our FTX credit line to repay the loans when they were called back."

By September 2022, due to the ongoing need to repay loans, Alameda's borrowing from FTX had increased to about $13.7 billion. In the following month, this figure rose to $14 billion.

Companies that Alameda owed included cryptocurrency lending firms BlockFi, Voyager Digital, and Celsius, all of which had filed for bankruptcy.

When they discussed ways for Alameda to recover some funds, SBF suggested the possibility of asking Saudi Crown Prince Mohammed bin Salman to purchase FTX shares. The FTX co-founder dined with the prince at a meeting arranged by financier Anthony Scaramucci in Riyadh at the end of October.

Ellison stated, "The reasoning behind this was to reduce the risk of further declines in cryptocurrency." He noted that bin Salman was seen as a primary target for new financing. "We would raise funds by selling FTX equity."

"Things That Put Pressure on SBF"

Ellison told the jury that this was a list saved in a Google document that she "frequently" updated.

What was SBF most worried about? Negative press, severe hedging deficiencies at Alameda, and Bankman-Fried also trying to find a way for regulators to crack down on its competitor Binance, as Bankman-Fried believed this strategy would help increase FTX's market share.

The list also included raising funds from Saudi Crown Prince Mohammed bin Salman (MBS), trading Japanese government bonds, and acquiring the parent company of Snapchat.

Ellison said that SBF's philosophy was that as a "utilitarian," he did not believe in the ways people tried to justify the rules, such as the rules against lying and stealing: "He believed the only important moral rule was to do anything that maximizes utility."