FTX Crisis Unfolded: Caroline Ellison’s Fear of Departure and an $8 Billion Gap

• Former Alameda CEO Caroline Ellison contemplated resignation amidst personal and company turmoil.
• Sam Bankman-Fried convinced Ellison to stay, fearing negative speculation about Alameda and FTX.
• A controversial balance sheet leak culminated in an $8 billion discrepancy between Alameda and FTX.

As revelations from the Bankman-Fried trial unfold, the depths of the FTX crisis become clearer. Ellison’s reluctancy to lead, paired with personal entanglements, painted a picture of a crumbling empire, leading to a financial disaster.

Ellison’s Testimony Sheds Light on Internal Turmoil

Caroline Ellison’s testimony was undeniably pivotal during the trial of Sam Bankman-Fried. As she walked through the front doors of the Manhattan federal court, the weight of past decisions seemed apparent. The end of their romantic relationship in April 2022 marked a significant downturn in their professional collaboration, culminating in Ellison’s hesitancy to remain involved in the company amidst rising liabilities and personal heartache.

From Trader to Reluctant CEO: Ellison’s Ascension at Alameda

Ellison’s journey with Alameda began as a trader in 2018. Her rapid rise saw her overseeing the bulk of the company’s operations by 2020, particularly as Bankman-Fried shifted his focus to FTX. Her apprehension towards the creation of FTX and her personal transformation under Bankman-Fried’s influence became evident during the trial. With Sam Trabucco’s eventual departure as co-CEO, Ellison found herself at the helm of an increasingly unstable ship.

The Crumbling Financial Infrastructure of Alameda

Alameda’s financial misgivings became apparent in mid-2022. Following the failure of the Terra ecosystem, the company faced mounting loans. As the market wavered, lenders grew impatient, leading to increased pressures on the company’s resources. Ellison’s claims highlight Bankman-Fried’s advice to repay creditors using FTX’s line of credit, essentially implying the utilization of FTX customer assets for these repayments. This shaky foundation would soon lead to devastating consequences.

The Leaked Balance Sheet and the Ensuing Chaos

November bore witness to a pivotal moment in this saga. A leaked version of Alameda’s balance sheet, although not entirely reflective of the company’s financials, instigated widespread speculation. The result was a catastrophic bank run on FTX, revealing a staggering $8 billion gap. Ellison’s crisis management from FTX’s Hong Kong office further showcases the gravity of the situation at that time.

Conclusion

Caroline Ellison’s leadership at Alameda during its tumultuous 2022 paints a vivid picture of corporate chaos and personal conflict. As pieces of her personal notes come to light in the ongoing trial, the narrative of FTX’s collapse becomes more transparent. While Ellison awaits her sentence, the repercussions of her decisions, combined with Bankman-Fried’s influence, have left an indelible mark on the crypto industry.