A dramatic twist has unfolded in the trial of Sam Bankman-Fried, the founder of FTX, as shocking revelations emerged during the testimony of his ex-girlfriend and former head of Alameda Research, Caroline Ellison, casting a shadow over the Bitcoin price and market integrity.
Ellison’s testimony has taken center stage, with her statements suggesting a conspiracy to manipulate Bitcoin prices by deliberately selling the cryptocurrency if it exceeded the $20,000 mark.
In the courtroom, she disclosed conversations and documents that provided insights into potential market manipulation.
One pivotal piece of evidence was a conversation note in which she had written, “Keep selling BTC if it’s over $20K,” implying a concerted effort to suppress Bitcoin prices. The prosecution probed the motives behind these actions and their repercussions on the market.
These revelations shed light on concerning practices within the FTX ecosystem. Ellison unveiled that, under Bankman-Fried’s direction, Alameda Research had borrowed a staggering $13 billion from FTX customers by September 2022.
These borrowed funds purportedly served the dual purpose of repaying loans and collateralizing various investments, raising questions about financial transparency and possible conflicts of interest.
Moreover, an unexpected twist of events occurred in the trial when Ellison highlighted discussions concerning Genesis, a retail lending platform. She testified that Genesis was teetering on the edge of insolvency and had requested $500 million from FTX.
Ellison claimed that Bankman-Fried instructed her to transfer the funds to Genesis, even in the face of doubts about the transaction’s legitimacy.
These revelations have cast a pall over FTX and its founder, Sam Bankman-Fried, a prominent figure in the cryptocurrency industry. The alleged Bitcoin price manipulation and questionable financial practices raise substantial concerns regarding market fairness and investor trust.
Against this backdrop, the Bitcoin price has continued its downward trajectory, falling below the $27,000 level after encountering resistance at $28,700 on October 2nd.
SBF’s Concerns: Binance, Snapchat, and the State of Capital
On another note, in the weeks and months leading up to the collapse of the exchange, Sam Bankman-Fried was deeply concerned about various matters.
These concerns included his investment in Snapchat shares, efforts to secure funding from Saudi royalty, and a push to have regulators take action against the rival cryptocurrency exchange, Binance.
This information was drawn from the personal notes of Caroline Ellison, and was presented by prosecutors during her testimony in New York.
During the trial, Ellison disclosed that a significant event in the Terra ecosystem’s crash in May 2022 prompted Bankman-Fried to contemplate shutting down Alameda and seeking a substantial $1 billion investment from a prominent Saudi Prince known for his blockchain gaming investments through Saudi Arabia’s sovereign wealth fund.
One of Bankman-Fried’s key priorities about a year ago was to encourage regulatory scrutiny of Binance in order to expand FTX’s market share. However, Ellison did not provide specific details on how he intended to achieve this. Bankman-Fried was also actively pursuing additional funds from the crypto lender BlockFi, which had already extended over $660 million in loans to Alameda.
Among his other concerns were trading Japanese government bonds, purchasing stocks of Snap Inc (SNAP), and ensuring the happiness of someone referred to as “Willie,” which may have been a reference to Bankman-Fried’s mentor, William MacAskill.
According to Ellison, Bankman-Fried placed blame on her for Alameda’s difficulties and suboptimal hedging strategies. She acknowledged during the trial that a better hedging strategy might have helped Alameda weather the crypto downturn but pointed out that the company also had substantial open-term loans and had utilized billions from its line of credit with FTX.
Open-term loans lack a specific maturity date, allowing the borrower the option of prepayment and the lender the option to call the loan.
Ellison also shared moments of emotional distress during her testimony. Despite her calm and resolute demeanor, she expressed her anxiety regarding the possibility of customers withdrawing their funds from FTX amid the “liquidity crunch” at Alameda.
As the trial unfolds, the cryptocurrency community and market observers will closely monitor the developments, eagerly anticipating further revelations regarding Bitcoin price manipulation and potential consequences for Bankman-Fried, Ellison, and the cryptocurrency exchange, FTX.