In the criminal investigation against the insolvent crypto exchange FTX, the American authorities have published the first interrogation protocols. The admissions of guilt by two former high-ranking managers show that they were aware of the unlawfulness of their actions.
Sam Bankman-Fried – here before a court in New York – is said to have plundered his customers’ accounts using the crypto platform FTX.
The evidence seems so overwhelming that denial is useless. In the scandal surrounding the collapsed FTX crypto exchange, two former high-ranking managers made extensive confessions to the investigative authorities last week and also admitted to having cheated investors. A record of the hearings made public on Friday makes it clear that the accused were well aware of the unlawfulness of their actions.
Concealments in the balance sheets
She is sincerely sorry for what she did, Caroline Ellison said under oath in a New York court earlier this week. “I knew it was wrong.” Ellison, 28, is the former CEO of Alameda Research and the former girlfriend of Sam Bankman-Fried, founder of the FTX platform. Trading firm Alameda Research was closely associated with FTX. It is said to have siphoned off money from customers of the crypto exchange in order to make up for its own deficits and to make risky investments.
Caroline Ellison is the former CEO of Alameda Research.
According to transcripts of the hearing, Ellison and Bankman-Fried jointly agreed to keep FTX investors, lenders and customers in the dark that Alameda was able to borrow a virtually unlimited amount from the crypto exchange. Ellison told authorities, “We prepared quarterly financial statements that obscured the extent of borrowing and the billions of dollars in loans that Alameda extended to FTX executives and related parties.”
FTX managers also arranged for Alameda to have access to the unlimited line of credit without having to post collateral, pay interest on negative balances, or pay any margin calls. She was aware, Ellison said, that most FTX clients did not expect their digital assets and fiat currency deposits to be loaned to Alameda in this way. These funds were subsequently loaned out by Alameda, including to Bankman Fried.
Manipulations of the FTX code
In addition to Ellison, 29-year-old FTX co-founder Gary Wang also came forward in a separate hearing last week. According to the minutes of the investigative authorities, Wang said he had been “directed” to make changes to the FTX code. This with the aim of granting Alameda special privileges on the trading platform. At the same time, Wang said he knew that crypto exchange investors and customers had always been assured that Alameda had no such privileges.
Wang held the role of chief technology officer (CTO) at the FTX exchange. He admitted to the judges that he was also aware of the illegality of his actions. As CTO, Wang was to a certain extent responsible for ensuring that the allegedly illegal transfers of customer funds ran smoothly from a technological point of view. Similar to Ellison, Wang says he wants to work closely with investigators in hopes of a lighter sentence from the court.
The main defendant Bankman-Fried has not shown any similarly close cooperation. His admission of guilt also goes far less far. He admits that FTX’s risk management has made mistakes. However, he remains convinced that he has not committed any criminal acts. The 30-year-old was released on Thursday on $250 million bail. However, he must remain at his parents’ home in Palo Alto, California, until the trial begins.
Protocol initially remained under lock and key
The question of why the authorities initially kept the minutes of Ellison and Wang’s statements under lock and key for days, only to make them public on Friday rather unexpectedly, causes conjecture. According to media reports, public prosecutor circles said they initially feared that the disclosure of statements that were very incriminating for Bankman-Fried could at best make his extradition from the Bahamas to the United States more difficult. On Thursday, however, this extradition went according to plan, and a day later the wording of the interrogations was already public.