Former Alameda Exec Says FTX Team Got Billions In 'Secret Loans'

Former FTX chief Sam Bankman-Fried is already facing a ton of serious charges from regulatory agencies and lawmakers, but now, his closest confidantes have flipped on him. Executives Caroline Ellison and Gary Wang recently pleaded guilty of fraud in a court, and in doing so, they also implicated Bankman-Fried for taking billions of dollars in secret loans from sister company Alameda Research.

The FTX saga began when it was revealed that the company's own FTT crypto token featured heavily on Alameda's balance sheet. Following a liquidity crisis, Binance backed out of an acquisition deal, and FTX went bankrupt, but not before funds worth hundred of millions of dollars went missing.

Ellison, who ran Alameda, told the court that she maintained sheets which hid "the extent of Alameda's borrowing and the billions of dollars in loans that Alameda had made to FTX executives," according to a Reuters report. She also reportedly assisted Bankman-Fried in hiding the fact that Alameda maintains a virtually unlimited line of loans from FTX from investors.

In the days leading up to hisarrest in the Bahamas and subsequent extradition to the U.S., Bankman-Fried denied any claims of criminal intent and willful wrongdoing. Instead, he blamed the whole thing on lack of oversight and threw associates like Ellison under the bus during a series of interviews.

Ellison told the court that, in June, investors demanded the money poured into Alameda, and she moved ahead with a suggestion from Bankman-Fried to use billions of dollars worth of FTX customer funds to repay the loans, assuming that customers would never get wind of the transactions.

Wang, on the other hand, is accused of putting "features in the code underlying the FTX trading platform that allowed Alameda to maintain an essentially unlimited line of credit on FTX" (via CFTC). He didn't say who directed him to make such changes at the code-level, but he did admit that he knew it was wrong. Wang said he was also aware that FTX top brass was misleading customers as well as investors about its handling of funds. According to a Bloomberg report, Ellison and Wang pleaded guilty to seven and four charges of fraud respectively, but have been released on bail.

They are hoping for reduced sentences, provided they continue to cooperate with ongoing investigations. Bankman-Fried was recently released on a $250 million bond.