Sam Bankman-Fried, Other FTX Executives Accepted Billions In Secret Loans: Report

FTX co-founder Gary Wang stated that he was asked to change the exchange's code to ensure Alameda's special privileges.

Bankman-Fried was released on bail after signing a bond of $250 million and agreeing to be placed under house arrest. ( Image Source :Getty )

Sam Bankman-Fried, former CEO and founder of the FTX crypto exchange, and multiple other company executives and managers accepted billions of dollars in hidden loans from Alameda Research. According to Reuters, Caroline Ellison, the former chief executive of Alameda Research, informed a US judge while pleading guilty to her involvement in the failure of the firm. She said that she was in agreement with Bankman-Fried to keep it confidential that the hedge fund was supposed to borrow huge sums of money from the exchange. A transcript of her December 19 plea hearing revealed that all this information was to be kept hidden from investors, lenders, and customers in the FTX.

According to the plea transcript, Ellison told US District Judge Ronnie Abrams in the Manhattan federal court, "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."

Both Ellison and FTX co-founder Gary Wang have pleaded guilty to the collapse of the firm. They are cooperating with the US prosecutors as mentioned in their plea agreements.

In a different hearing on December 19, Wang stated that he was asked to change FTX's code to ensure Alameda's special privileges, as per the Reuters report. He added that this was being done even when others were informing investors and customers about the non-existence of any such Alameda privileges. However, he did not reveal the name of the particular person who ordered him to do so.

Ellison also told the court that investors had recalled the loans in June 2022 that they made to Alameda Research. At that time, she consented with others to borrow billions of dollars in FTX customer funds to pay them back. This was done as customers were not aware of the loan arrangement. She has now apologised for her actions, and currently, she is providing assistance in recovering customer assets. She said, "I am truly sorry for what I did." Wang also agreed that he was aware of what he was doing was wrong.

Earlier, US prosecutor Nicolas Roos told the court that Bankman-Fried perpetrated a "fraud of epic proportions." This resulted in the loss of billions of dollars of customers and investors.

Even though Bankman-Fried has accepted risk-management failures at FTX, he asserted that he does not have any criminal liability. Therefore, he has not yet entered in a plea.

He founded the FTX in 2019, and it quickly rose to billions of dollars in value. The Royal Bahamas Police arrested him on December 12 in Nassau, the country's capital. The crypto exchange firm FTX filed for bankruptcy on November 11.

Later, he was released on bail after signing a bond of $250 million and agreeing to be placed under house arrest. A magistrate judge in the US ordered him to be confined at his parents' home in California until trial.

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