Former CEO of Alameda Research, Caroline Ellison, has indicated that a single social media post from Binance CEO Changpeng “CZ” Zhao played a role in the downfall of crypto exchange FTX.
While bearing witness in Sam “SBF” Bankman-Fried’s criminal trial on October 12th, Ellison attributed, in part, the unraveling of FTX to CZ’s online communications. A notable message from CZ on X (previously Twitter) dated November 6, 2022, declared that Binance would divest its FTX Token (FTT) holdings, citing emerging revelations as the reason. Numerous reports suggest that the token liquidation incited retail investors to mimic Binance’s actions and retract funds from FTX. This led to a liquidity crisis on the platform, culminating in a pause in withdrawals and a bankruptcy filing on November 11th.
Ellison pointed out that while the tweet was a contributing factor, the primary catalyst for FTX’s collapse was Alameda’s inability to repay a $10 billion loan from the exchange. Her initial testimony in SBF’s trial, which commenced on October 10th, claimed that Bankman-Fried instructed her to authorize Alameda to extract billions from FTX without informing users.
In a counter-statement via a thread dated December 6, CZ refuted the allegation that his tweet “demolished FTX,” asserting, “No wholesome business can be obliterated by a tweet.” He highlighted Ellison’s own November 6 post, wherein Alameda’s proposal to purchase Binance’s FTT holdings “was the actual trigger for individuals to offload” the tokens. The trial also unveiled various insights provided by Ellison, including Bankman-Fried’s purported aspirations for the US presidency, the crafting of several “alternative” Alameda financial spreadsheets for presentation to Genesis, and SBF’s exploration of potential backing from Saudi Crown Prince Mohammed bin Salman.
During cross-examination by defense lawyer Mark Cohen, Ellison’s testimony appeared to center around Bankman-Fried’s awareness of Alameda’s functioning. Upon Cohen’s probing, Ellison conveyed that she “may have mentioned that [SBF] might have been uninformed” about her apprehensions “jeopardizing FTX clients’ assets.” The assertion was deemed “ambiguous” by Assistant U.S. Attorney Danielle Sassoon.
Ellison, testifying on the seventh day of SBF’s criminal trial which inaugurated on October 3, was among the first insiders from FTX and Alameda to enter a guilty plea, in exchange for her testimony as part of a deal with U.S. officials.
SBF, pleading not guilty to seven criminal counts in the ongoing trial anticipated to extend through November, is set to confront an additional five charges in a subsequent trial in March 2024.
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