Caroline Ellison’s testimony at Sam Bankman-Fried’s trial unfold right into a second day, digging deep into the state of crypto buying and selling agency Alameda Analysis’s defective steadiness sheets.
“We had been in a nasty state of affairs,” Ellison mentioned, referring to the time interval between Could and June 2022. “[We were] involved if anybody discovered it will all come crashing down.”
On the time, Terra/LUNA collapsed, inflicting quite a few crypto market gamers to battle and cryptocurrencies to lose worth. The stablecoin’s implosion got here months earlier than FTX itself collapsed, an occasion that was triggered when a steadiness sheet was leaked by CoinDesk that solid doubt on its solvency. Ellison testified that the steadiness sheet was one shared with lenders, not the correct one the corporate used internally. Which means the steadiness sheet CoinDesk reported on was additionally “dishonest” and nonetheless “understated true danger” of Alameda and FTX.
Ellison testified that Alameda needed to repay crypto lenders like Genesis, who had been asking for loans to be repaid. She mentioned FTX buyer deposits had been used to repay lenders, and when lenders requested steadiness sheets in mid-June 2022, FTX modified them as a result of “Alameda was in a really unhealthy state of affairs” and didn’t need “[Genesis] to know that.”
However as an alternative of sending truthful steadiness sheets, exhibiting how a lot cash Alameda “borrowed” from FTX, they modified it to “make [its] leverage and danger look decrease.” This was accomplished on the path of Bankman-Fried, Ellison mentioned.
She added that this was accomplished for a number of causes, one in all which was that Alameda didn’t need Genesis to recall all of Alameda’s loans or for the information to unfold as a result of it will add concern concerning the agency.
“I didn’t need to be dishonest but in addition didn’t need to inform the reality,” Ellison mentioned on the stand.
So she ready seven steadiness sheets for Bankman-Fried to assessment with “other ways” of presenting their monetary state of affairs to “conceal issues” that they “each thought had been unhealthy.” These steadiness sheets had been made “to look higher to lenders,” Bankman-Fried mentioned on the time, based on Ellison.
On the time in June 2022, Alameda borrowed $9.9 billion from FTX prospects, which “made it clear Alameda was in a dangerous state of affairs,” Ellison mentioned, and would make FTX “look very unhealthy.” It additionally had open time period loans price $1.8 billion that must be paid again at any time a lender reached out to ask for the cash again, in addition to $2.9 billion in fastened time period loans that had been “long-term liabilities,” Ellison mentioned.
The corporate on the time had round $12 billion in liabilities and $3 liquid billion in property, per Ellison.