Ellison, CEO of Alameda, says she and SBF knowingly misled FTX lenders

Ellison made her first public account of her actions in a December 19 hearing in federal court in Manhattan. “I knew it was wrong,” she said, according to a transcript of the hearing.

Bankman-Fried, 30, is accused of orchestrating a years-long scam in which he used billions of dollars in FTX client funds for personal spending and high-risk bets through Alameda, the cryptocurrency exchange’s sister trading house.

Ellison and FTX co-founder Gary Wang, also appearing in a hearing Dec. 19, has pleaded guilty to the fraud charges and is cooperating with the Manhattan Attorney’s Office.

Alameda’s “unlimited line of credit”

“From 2019 to 2022, I was aware that Alameda was granted access to a lending facility on FTX.com, the cryptocurrency exchange operated by Mr. Bankman-Fried,” Ellison said, adding, “In practice, this agreement gave Alameda access to an unlimited line of credit without posting collateral, without negative balances and without being subject to margin calls in FTX.com’s liquidation protocols.”

Ellison said, “It was clear to me that if Alameda’s FTX accounts had significant negative balances in a particular currency, that meant Alameda was borrowing funds that FTX clients had deposited on the exchange.”

She said she and Bankman-Fried agreed to hide that arrangement from lenders and prepared false financial reports to hide the amount of Alameda’s borrowing.

Wang said in his plea hearing that he was “ordered” to make changes to the FTX platform’s code that he knew would give Alameda special privileges and that misrepresentations would be made to clients and investors.

“I know what I did wrong,” Wang said.