NEW YORK, December 23 (Reuters) – Sam Bankman-Fried and other FTX officials received billions of dollars in secret loans from crypto mogul’s Alameda Research, the former hedge fund manager told a judge after he admitted his role in the exchange’s collapse.
Caroline Ellisonformer chief executive of Alameda Research, said he agreed with Bankman-Fried to hide from FTX’s investors, creditors and customers that the hedge fund could borrow amounts not limited from the exchange, according to a text of his request on December 19 that was not recorded above. Friday.
“We prepared quarterly balance sheets that hid the size of Alameda’s loan and the billions of dollars in loans Alameda made to FTX executives and other parties,” Ellison told the judge. US District Ronnie Abrams in Manhattan federal court, according to the transcript. .
Ellison and FTX co-founder Gary Wang both pleaded guilty and are cooperating with lawyers as part of their plea agreements. Their sworn statements offer a glimpse into how former associates of Bankman-Fried may testify against him as prosecution witnesses.
In another hearing on the petition, on December 19, Wang said he was ordered to make changes to the FTX law to give Alameda special privileges on the trading floor, but he knows others are telling businessmen and consumers that Alameda has no such benefits.
Wang did not reveal who gave him the instructions.
Nicolas Roos, a prosecutor, said in court Thursday that the Bankman-Fried trial will include testimony from “many corroborating witnesses.” According to Roos, Bankman-Fried committed a “significant misrepresentation” that resulted in the loss of billions of dollars in consumer and bank deposits.
Bankman-Fried has acknowledged poor risk management at FTX but says he does not believe he is criminally liable. He did not plead.
Bankman-Fried founded FTX in 2019 and ride a boom in the value of bitcoin and other digital assets to become billionaires on many occasions as well as a powerful donor to American political campaigns.
A massive customer withdrawal in early November amid concerns about FTX’s merger with Alameda led FTX to file for bankruptcy in Nov. 11.
Bankman-Fried, 30, was released Thursday $250 million obligation. His spokesman declined to comment on Ellison and Wang’s comments.
Lawyers for Wang and Ellison declined to comment.
Ellison told the court that when the investors recalled in June 2022 the loans they made to Alameda, he and others agreed to borrow billions of dollars in the money of the company’s customers. FTX to pay, with the understanding that customers do not know the plan.
“I’m very sorry for what I did,” Ellison said, adding that he was helping to restore the client’s assets.
Wang also said that he knew what he was doing was wrong.
Ellison’s trial transcript was originally sealed because of concerns that disclosure of his cooperation could hinder prosecutors’ efforts to extradite Bankman-Fried from the Bahamas, where he lived and where contained FTX, court records showed.
Bankman-Fried was arrested in the capital of Nassau on December 12 and arrived in the United States on Wednesday after agreeing to extradition.
The judge ordered him to be detained at his parents’ home in California until the trial.
On Friday evening, Abrams avoided the case, saying in a court order that the law firm Davis Polk & Wardwell LLP, where her husband is a partner, advised FTX to the 2021.
This company also represented parties that may oppose FTX and Bankman-Fried in other proceedings, said the judge, and although his wife is not involved in these cases, which “is not confidential and the Court does not know their affairs,” restrained himself to avoid a possible conflict.
Luc Cohen reports in New York; Written by Tom Hals in Wilmington, Del.; Edited by Noeleen Walder, Matthew Lewis and Daniel Wallis
Our standards: The Thomson Reuters Trust Principles.