Exclusive Alameda Recording Uncovers the Moment Staff Heard About FTX Deposits

A 75-minute secretly recorded audio clip has unveiled the exact moment when 15 former Alameda Research staff members discovered the hedge fund’s controversial practices of “borrowing” user funds from FTX, a cryptocurrency exchange. This clandestine recording sheds light on the palpable tension that enveloped Caroline Ellison and the Alameda team in the lead-up to FTX’s eventual collapse.

Read more: Caroline Ellison: “Sam Bankman-Fried Wanted Regulators to Crack Down on Binance”

The Alameda Revelation

During an all-hands meeting in Hong Kong on November 9, 2022, Caroline Ellison revealed the unsettling truth to her colleagues. She disclosed that Alameda had been borrowing substantial sums of money through open-term loans, primarily using these funds for illiquid investments, including significant positions in FTX and FTX US equity. However, the situation took a dire turn when most of Alameda’s loans were abruptly called in to address the recalls, leading to FTX facing a shortfall in user funds.

In a jaw-dropping statement, Ellison acknowledged that “[FTX] basically always allowed Alameda to borrow users’ funds.” This revelation sent shockwaves through the meeting, leaving the 15 or so staff members in attendance bewildered and concerned.

The Legal Implications

Segments of this incriminating audio recording were also played in a courtroom during the eighth day of Sam Bankman-Fried’s criminal trial on October 12. The recording was presented as part of the witness testimony by Christian Drappi, a former software engineer at Alameda. Drappi, who was apparently unaware of the hedge fund’s actions before the meeting, pressed Ellison for more details on when she became aware of the misuse of FTX user deposits.

The playback of this audio led to an unexpected moment in court when Drappi had to explain the term “YOLO” to those in attendance, insinuating that this wasn’t a spontaneous decision. Drappi described Ellison’s demeanor during the meeting as “sunken,” and her lack of confidence in addressing the Alameda employees stunned him. The revelations from the audio recording prompted him to quit the next day.

According to Aditya Baradwaj, an Alameda Research engineer who was present at the meeting, the atmosphere in the room was extremely tense. Ellison unveiled a wealth of new information that had never been discussed internally, including the controversial and later-abandoned acquisition of FTX by its then-largest competitor, Binance.