In June 2022, amid the broader crypto meltdown, Caroline Ellison and FTX co-founder Sam Bankman-Fried were looking at a massive hole in Alameda Research’s balance sheet, a New York court heard on Wednesday.
FTX’s affiliated hedge fund had borrowed billions of dollars from the cryptocurrency exchange’s deposits. If FTX customers or potential lenders caught wind of it, Ms Ellison, Alameda’s chief executive, feared it would “all come crashing down”.
But Mr Bankman-Fried had a solution: create new balance sheets. Ms Ellison came up with seven, the court heard.
The alternative balance sheets were one of the ways Mr Bankman-Fried asked her to lie in his futile efforts to preserve his crypto empire, Ms Ellison said during her second day on the stand as the star witness in his fraud trial in Manhattan federal court.
Towards the end of her testimony, Ms Ellison fought back tears as she recalled her feelings when Alameda’s $14 billion debt to FTX finally doomed both companies.
“That was, overall, the worst week of my life,” Ellison testified Wednesday about the exchange’s November 2022 collapse.
Though she “felt indescribably bad about people who were harmed,” Ms Ellison said she was also relieved.
“I felt a sense of relief that I didn’t have to lie any more, that I could start taking responsibility for what I had done,” said Ms Ellison, who pleaded guilty to fraud and agreed to co-operate with prosecutors barely a month after FTX’s bankruptcy.
Wednesday’s testimony by Ms Ellison, who is also Mr Bankman-Fried’s ex-girlfriend, directly took on one of his main defence arguments: that she, not he, was in charge of Alameda when it borrowed billions from FTX. For months, Mr Bankman-Fried has suggested that Ms Ellison was primarily responsible for Alameda’s borrowing and that he only failed to supervise her.
“I mean, I absolutely could have, should have done things differently, and I could have hedged things earlier in the year,” Ms Ellison testified. “But Sam was the one who chose to make all these investments that put us in a leveraged position in the first place.”
She also cast in a new light Mr Bankman-Fried’s well-publicised adherence to the effective altruism movement, which encourages followers to make as much money as possible to use for the betterment of society.
During FTX’s better days, Mr Bankman-Fried was a well-known donor to the Democratic Party and other causes. Ms Ellison noted that he initially bought luxury cars but then switched to a Toyota Corolla, which he thought would be “better for his image”.
Ms Ellison, who followed effective altruism, testified Mr Bankman-Fried’s beliefs were such that even actions like lying and stealing could be justified in pursuit of the greater good. She said Mr Bankman-Fried’s outlook influenced her as well.
“When I started working at Alameda, I don’t think I would have believed if you told me I would be sending false balance sheets to our lenders or taking customer money, but over time it was something I felt more comfortable with,” Ms Ellison testified.
Mr Bankman-Fried’s lawyers could begin their cross-examination on Thursday.
Under questioning by Assistant US Attorney Danielle Sassoon, Ms Ellison detailed the growing sense of crisis permeating the crypto industry through the spring and summer of 2022, following the collapse of Terraform Labs’s stablecoin. Ms Ellison said Alameda had borrowed $13 billion from FTX by mid-June 2022.
“I was in a state of dread,” she said of that time. “I was kind of thinking and imagining every day about what might happen if people tried to withdraw too much money at one time.”
She said she imagined FTX customers, lenders and everyone Alameda worked with “would get hurt by this”.
It was in that context that Mr Bankman-Fried asked her to create false balance sheets for Alameda that would conceal the scale of Alameda’s exposure to FTX from lenders like Genesis.
“I understood him to be directing me to come up with ways to conceal things in our balance sheet we both agreed would look bad,” Ms Ellison said.
In August 2022, she said Mr Bankman-Fried started blaming her for the worsening situation.
“Sam started saying Alameda should have hedged way more earlier in the year, that was a big mistake, that was my fault, and I was largely responsible for the financial situation,” Ms Ellison testified. “I got upset. I started crying.”
She said that she probably did make mistakes but said Mr Bankman-Fried was more to blame for the mess they found themselves in.
In describing her growing concerns, Ms Ellison echoed earlier testimony by other prosecution witnesses, including FTX co-founder Gary Wang, who said Mr Bankman-Fried directed him to alter the exchange’s backend code so that Alameda could borrow unlimited amounts. Mr Wang also pleaded guilty and agreed to co-operate in December.
Mr Wang and Ms Ellison were often in the same group Signal chats with Mr Bankman-Fried and other FTX executives, she said. That continued into the autumn of 2022, by which time Ms Ellison said she and Mr Bankman-Fried were no longer a couple.
“We had broken up a few months prior, so I was trying to avoid spending much time with him in a social context and having one-on-one conversations with him,” she testified.
OPINIONS ON PALESTINE & ISRAEL
Founders: Abdulmajeed Alsukhan, Turki Bin Zarah and Abdulmohsen Albabtain.
Based: Riyadh
Offices: UAE, Vietnam and Germany
Founded: September, 2020
Number of employees: 70
Sector: FinTech, online payment solutions
Funding to date: $116m in two funding rounds
Investors: Checkout.com, Impact46, Vision Ventures, Wealth Well, Seedra, Khwarizmi, Hala Ventures, Nama Ventures and family offices
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Company%20profile
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Honeymoonish
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Wenger's Arsenal reign in numbers
1,228 - games at the helm, ahead of Sunday's Premier League fixture against West Ham United.
704 - wins to date as Arsenal manager.
3 - Premier League title wins, the last during an unbeaten Invincibles campaign of 2003/04.
1,549 - goals scored in Premier League matches by Wenger's teams.
10 - major trophies won.
473 - Premier League victories.
7 - FA Cup triumphs, with three of those having come the last four seasons.
151 - Premier League losses.
21 - full seasons in charge.
49 - games unbeaten in the Premier League from May 2003 to October 2004.
NEW ARRIVALS
Benjamin Mendy (Monaco) - £51.75m (Dh247.94m)
Kyle Walker (Tottenham Hotspur) - £45.9m
Bernardo Silva (Monaco) - £45m
Ederson Moraes (Benfica) - £36m
Danilo (Real Madrid) - £27m
Douglas Luiz (Vasco de Gama) - £10.8m
ULTRA PROCESSED FOODS
- Carbonated drinks, sweet or savoury packaged snacks, confectionery, mass-produced packaged breads and buns
- margarines and spreads; cookies, biscuits, pastries, cakes, and cake mixes, breakfast cereals, cereal and energy bars;
- energy drinks, milk drinks, fruit yoghurts and fruit drinks, cocoa drinks, meat and chicken extracts and instant sauces
- infant formulas and follow-on milks, health and slimming products such as powdered or fortified meal and dish substitutes,
- many ready-to-heat products including pre-prepared pies and pasta and pizza dishes, poultry and fish nuggets and sticks, sausages, burgers, hot dogs, and other reconstituted meat products, powdered and packaged instant soups, noodles and desserts.
UAE currency: the story behind the money in your pockets
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
Titan Sports Academy:
Programmes: Judo, wrestling, kick-boxing, muay thai, taekwondo and various summer camps
Location: Inside Abu Dhabi City Golf Club, Al Mushrif, Abu Dhabi, UAE
Telephone: 971 50 220 0326
KILLING OF QASSEM SULEIMANI
CREW
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Our Time Has Come
Alyssa Ayres, Oxford University Press
Key fixtures from January 5-7
Watford v Bristol City
Liverpool v Everton
Brighton v Crystal Palace
Bournemouth v AFC Fylde or Wigan
Coventry v Stoke City
Nottingham Forest v Arsenal
Manchester United v Derby
Forest Green or Exeter v West Brom
Tottenham v AFC Wimbledon
Fleetwood or Hereford v Leicester City
Manchester City v Burnley
Shrewsbury v West Ham United
Wolves v Swansea City
Newcastle United v Luton Town
Fulham v Southampton
Norwich City v Chelsea
Getting there
Flydubai flies direct from Dubai to Tbilisi from Dh1,025 return including taxes
2019 Asian Cup final
Japan v Qatar
Friday, 6pm
Zayed Sports City Stadium, Abu Dhabi
RESULT
Huddersfield Town 2 Manchester United 1
Huddersfield: Mooy (28'), Depoitre (33')
Manchester United: Rashford (78')
Man of the Match: Aaron Mooy (Huddersfield Town)
A list of the animal rescue organisations in the UAE
The%20specs%3A%202024%20Mercedes%20E200
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more from Janine di Giovanni
Abu Dhabi Desert Challenge – Rally schedule:
Saturday: Super Special Spectator Stage – Yas Marina Circuit – start 3.30pm.
Sunday: Yas Marina Circuit Stage 1 (276.01km)
Monday: Nissan Stage 2 (287.92km)
Tuesday: Al Ain Water Stage 3 (281.38km)
Wednesday: ADNOC Stage 4 (244.49km)
Thursday: Abu Dhabi Aviation Stage 5 (218.57km) Finish: Yas Marina Circuit – 4.30pm.
Dhadak 2
Director: Shazia Iqbal
Starring: Siddhant Chaturvedi, Triptii Dimri
Rating: 1/5
