A clandestine 75-minute audio recording, captures the moment Caroline Ellison told 15 ex-employees of Alameda Research that the hedge fund's act of "borrowing" FTX user funds.
The recording, accessed by Cointelegraph, casts light on the escalating stress Ellison and the Alameda team faced before FTX's downfall.
This revelation comes just ahead of Benzinga's Future of Digital Assets conference set for Nov. 14.
In a Hong Kong all-staff meeting on Nov. 9, 2022, Ellison said, “Alameda was kind of borrowing a bunch of money via open-term loans and using that to make various illiquid investments... Most of Alameda’s loans got called in, in order to meet those recalls.”
“We ended up borrowing a bunch of funds from FTX, which led to FTX having a shortfall in user funds,” she added.
Ellison was also recorded saying that “[FTX] basically always allowed Alameda to borrow users’ funds.”
In the ongoing criminal trial of Sam Bankman-Fried on Oct. 12, parts of this audio were played as evidence, corroborating testimony from Christian Drappi, a former software engineer at Alameda. Drappi's appearance in court followed Ellison's three-day testimony.
Drappi's court appearance followed Ellison's three-day testimony.
Also Read: Caroline Ellison Reveals Manipulated Alameda Balance Sheets In Bankman-Fried Trial
It was brought to light that many Alameda staff members, including Drappi, were previously oblivious to the hedge fund's alleged use of FTX client funds to support its trades.
In the audio playback, Drappi is heard asking Ellison about when she discovered Alameda's misuse of FTX deposits and who else was privy to this information.
Ellison hesitated initially, prompting Drappi to push with, “I’m sure this wasn’t, like, a YOLO thing, right?”
This led to a lighter moment in the courtroom when Drappi had to demystify the term "YOLO", indicating he was probing if the decision to use the deposits was not made impulsively.
In his court statement, Drappi characterized Ellison’s demeanor during the meeting as "sunken" and lacking assurance.
The revelation about FTX and Alameda's deep ties left Drappi "stunned", prompting his resignation the next day.
Alameda Research's engineer, Aditya Bharadwaj, who attended the same meeting, described the atmosphere as “extremely tense.”
He disclosed to Cointelegraph that several previously unknown details emerged at the meeting, such as the later-abandoned plan for Binance to acquire FTX.
Baradwaj added, “It became pretty clear that there was no future for the company and that we all had to leave. And we did that right after.”
Read Next: FTX's Gary Wang Reveals Shocking Details In Courtroom Testimony
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