A recently leaked audio clip of Caroline Ellison, a former employee of Alameda Research, has shed light on the moment when 15 staff members at the trading firm discovered that the company was “borrowing” user funds from FTX. The 75-minute recording, obtained by Cointelegraph, provides valuable insights into the increasing tension felt by Ellison and her colleagues in the lead-up to FTX’s collapse.
During an all-hands meeting in Hong Kong on November 9, 2022, Ellison explained that Alameda had been borrowing money through open-term loans to make illiquid investments, including investments in FTX and FTX US equity. However, most of Alameda’s loans were called in to meet the recalls, leading to a shortfall in user funds for FTX. Ellison revealed that FTX had always allowed Alameda to borrow users’ funds, a fact that she shared with the 15 staff members present at the meeting.
Segments of the recorded meeting were played in court on the eighth day of Sam Bankman-Fried’s criminal trial, as part of witness testimony from Christian Drappi, a former software engineer at Alameda. Drappi and many other Alameda employees were unaware of the alleged misuse of FTX customer deposits prior to this meeting. During the recording, Drappi asked Ellison when she became aware of Alameda’s actions and who else at the company was aware of it. Initially hesitant to answer, Ellison eventually confirmed that it was not a spontaneous decision.
The playback of the audio recording in court led to a lighthearted moment when Drappi had to explain the meaning of the term “YOLO” to everyone present. He used the term to emphasize that he wanted Ellison to confirm that the use of FTX deposits was not a rash or impulsive decision. In his testimony, Drappi described Ellison’s conduct at the meeting as “sunken” and lacking confidence. He was stunned by the extent of the relationship between FTX and Alameda and decided to quit the next day.
According to Aditya Baradwaj, an engineer at Alameda Research who was also present at the meeting, the atmosphere in the room was extremely tense. Ellison revealed a wealth of new information that had never been discussed internally, including the abandoned acquisition of FTX by its competitor Binance. Baradwaj stated that it became evident that there was no future for the company and that they all decided to leave immediately after the meeting.
The leaked audio clip and the subsequent testimonies in court have exposed the troubling practices of Alameda Research and the consequences they had on FTX. This revelation has further damaged the reputation of both companies and highlights the need for stricter regulations and oversight in the cryptocurrency industry.