Caroline Ellison admits to concealing billions of dollars of FTX loans

FTX associate Caroline Ellison admitted during her plea deal that she concealed billions of dollars worth of loans, according to a Reuters report on Dec. 23.

As the former CEO of Alameda Research, Ellison reached an arrangement with former FTX CEO Sam Bankman-Fried that allowed FTX to borrow funds from Alameda without limit. The two executives also hid that fact from investors and the wider public.

Alameda Research is generally considered a sister firm of FTX, as Bankman-Fried founded both firms. While FTX operated as a cryptocurrency exchange, Alameda served as a hedge fund, allowing the two companies to work together closely.

Ellison admitted to the lending arrangement in a statement to U.S. District Judge Ronnie Abrams in Manhattan federal court. She said:

“We prepared certain quarterly balance sheets that concealed the extent of Alameda’s borrowing and the billions of dollars in loans that Alameda had made to FTX executives and to related parties.”

That admission was made as part of Ellison’s plea deal. Though her plea hearing took place on Dec. 19, the transcript was not unsealed until today, Dec. 23.

The fact that Ellison and fellow FTX associate Gary Wang had chosen to accept a plea deal was first reported on Dec. 21. That report also indicated that the two individuals would cooperate in the ongoing case against Bankman-Fried.

The unsealing of Ellison’s plea deal today revealed that she will not face punishment beyond a fine and asset forfeiture as long as she further cooperates with officials.

Reports elsewhere also suggest that, at the request of attorneys involved in the case, Judge Abrams prevented Bankman-Fried from learning of Ellison and Wang’s cooperation. Otherwise, Bankman-Fried may have chosen to fight extradition.

Bankman-Fried is on bail and under house arrest at his parents’ home in Palo Alto, California. His next court date is Jan. 3, 2023.