Caroline Ellison (left) and Sam Bankman-Fried (right).
Michael M. Santiago via Getty Images
Caroline Ellison held an all-hands meeting with Alameda employees where she admitted to taking FTX customer funds.A few minutes were played at Sam Bankman-Fried’s criminal trial Thursday.We got our hands on a recording of the entire hour-long meeting.
The news came as a shock.
On November 8, 2022, Sam Bankman-Fried announced that Binance agreed to buy FTX, his competing cryptocurrency exchange, which was in the middle of melting down.
The news sent shockwaves through the office of Alameda Research, the crypto trading firm also owned by Sam Bankman-Fried. It arrived at about 11 p.m. in Hong Kong, where the office was located.
Ellison told the other employees in the office that Alameda would shut down.
The next day, Ellison held an all-hands meeting with the Alameda Research staff in the Hong Kong office. She had just cut short her vacation to Japan to handle a series of crises at the company. About 15 employees attended in person, mostly sitting on a semi-circle couch, with Ellison sitting opposite on a bean bag. Nearly everyone else from the 30-person company attended remotely.
Insider has obtained an audio recording of the hour-long meeting, which it is publishing below. The meeting begins at the 18-minute mark.
The inside view of the meeting was relayed in federal court Thursday by Christian Drappi, a software engineer who had worked at Alameda since May 2021.
Drappi provided an audio recording of the meeting to federal prosecutors, who played a few minutes worth of selected clips as exhibits in court. Insider has obtained a full recording of the meeting.
At the meeting, Ellison initially explained that cryptocurrency prices were cratering, and Alameda didn’t have enough liquidity to cover loans that lenders were recalling.
Also, she added, Alameda had taken funds from customers on FTX without their permission.
After Ellison finished her own three-day marathon of testimony, Drappi took the witness stand in the criminal trial against Sam Bankman-Fried, who prosecutors say defrauded FTX customers and Alameda investors and lenders, among other crimes, by stealing FTX customer funds for his own benefit.
“I was utterly shocked,” Drappi told jurors Thursday.
At the all-hands meeting, Ellison appeared “sunken, kind of slouching,” and “did not display confident body language,” Drappi said.
She said Alameda would focus on repaying lenders and creditors, and that employees were welcome to talk to “their own counsel” about moving forward.
“My current hope is that FTX users will have their deposits made whole and so that would include employees,” she said. “If that doesn’t happen — yeah, TBD I guess.”
“I’m sorry. I know that’s a very shitty answer and it feels very shitty for employees who relied on trusted FTX to end up getting hurt by that,” she added.
Small snippets were played at SBF’s criminal trial
Another Alameda coworker, Rick Best, sitting to her left, secretly recorded the meeting, Drappi testified.
“He was an Alameda trader who joined three days before this all went down,” Drappi said.
Drappi said Best later gave him a copy, which Drappi then gave to prosecutors.
At the meeting, Drappi asked Ellison whether she was aware that Alameda was taking customer money without their permission.
“I guess,” she answered.
When Drappi pressed her on the issue — saying “I’m sure this wasn’t just a YOLO thing” to take the money — Ellison admitted she had known since earlier in the year, as did Bankman-Fried, as well as FTX executives Gary Wang and Nashad Singh. (Ellison, Wang, and Singh have all pleaded guilty to charges related to the scheme.)
“FTX basically always allowed Alameda to use user funds,” Ellison said.
Drappi asked whether Ellison understood that FTX customers “would be fucked” without their money.
Ellison thought crypto prices would rise again, allowing Alameda to balance things out, but that “did not work out,” she responded, before giggling.
Drappi quit within 24 hours of the meeting, he testified Thursday. Binance ultimately did not buy FTX, which declared bankruptcy when Bankman-Fried relinquished control two days after the Alameda all-hands meeting.
Bankman-Fried’s lawyers argued Thursday that Ellison’s statements at the meeting went far beyond what Bankman-Fried intended to tell Alameda employees.
In a text message screenshot previously shown to jurors, Bankman-Fried advised Ellison to simply tell them that the company was shutting down and it would be appreciated if they stuck around to help wind things down.
Christian Everdell, one of Bankman-Fried’s attorneys, said Ellison’s confession of crimes was not just a “sober unburdening.” She was laughing while giving some answers, he said.
“Thanks, it was a lot of fun,” Ellison replied with a giggle after one employer thanked her for being “open and honest.”
Drappi testified in court that Ellison was prone to “nervous laughter.”