“I knew it was wrong”

“I’m really sorry for what I did — I knew it was wrong,” Ellison told a US District Court judge. This emerges from a transcript of their December 19 hearing. The transcript was initially kept under wraps until FTX founder Sam Baknman-Fried was “released” on $250 million bail a few days later. Alongside Sam Bankman-Fried and FTX co-founder Gary Wang, Ellison is considered the most important key figure in the case surrounding the collapsed crypto exchange. Both Wang and Ellison had pleaded guilty. They have also assured the authorities that they will cooperate in dealing with the events surrounding FTX.

Ellison told the court that, in collusion with Bankman-Fried, she had provided Alameda’s lenders with “materially misleading financial reports.” The court investigates: “Did you also know it was illegal?” Ellison replied: “Yes.”

The misleading reports were “quarterly financial statements that obscured the extent of Alameda’s borrowing and the billions of dollars in loans Alameda had made,” according to Ellison. “I have agreed with Mr. Bankman-Fried and others not to make public the true nature of the relationship between Alameda and FTX, including Alameda’s loan agreement,” she said.

The transcript was published by The New York Times, Reuters and Bloomberg viewed and published separately.

FTX and Alameda: Suspicion confirmed

Ellison’s statements confirm what many feared beforehand. Sam Bankman-Fried and his accomplices used FTX client funds to fund loans from Alameda Research. “I understood that when Alameda’s FTX accounts had significant negative balances in a particular currency, it meant that Alameda was borrowing funds that the FTX clients had deposited on the exchange.”

Ellison admitted to the court that he knew about these events. “I was aware that FTX had to use client funds to fund its loans to Alameda.”

Sam Bankman-Fried has yet to comment on the allegations. The 30-year-old is currently awaiting trial at his parents’ home under FBI surveillance.

How Ellison’s cooperation will affect a possible sentence remains to be seen: “I’m here today to take responsibility for my actions by pleading guilty,” she concluded.