Bankman-Fried started $2bn venture fund using Alameda money, reveals ex-girlfriend
Sam Bankman-Fried, ex-CEO of FTX, is facing allegations of using loans from third-party lenders like Genesis Global Capital to finance his $2 billion venture fund, FTX Ventures. Caroline Ellison, the former Alameda Research CEO (Bankman-Fried's crypto trading firm), and his ex-girlfriend testified as the prosecution's fifth witness in his six-week trial. She claimed that he instructed her to engage in fraudulent and money laundering activities.
Alameda Research's risky financial position
Ellison's testimony exposed Alameda Research's shaky financial situation, with a net asset value of negative $2.7 billion. Despite her warnings against investing an additional $3 billion into early-stage companies, Bankman-Fried insisted on more investments. He also pushed for changing Alameda's loans from open-term to fixed-term, reducing the risk of loan recalls.
Potential consequences of investments and loans
Ellison estimated that if Alameda Research invested $3 billion with its mostly open-term loan structure and faced a market downturn, there would be a 25% chance of Genesis recalling its loans. The probability of the company being unable to make loan payments would skyrocket from 30% to 100%. In this scenario, Alameda wouldn't be able to repay its loans, even with an unlimited line of credit and access to FTX customer funds.
Continuation of Ellison's testimony
Caroline Ellison's testimony and cross-examination will resume later today. The outcome of this trial could significantly impact Bankman-Fried and his $2 billion venture fund, FTX Ventures. This case underscores the need for transparency and ethical practices in the fast-growing cryptocurrency industry.
