January 27, 2023

Caroline Ellison, the former CEO of Alameda Research, said as part of her plea deal that she was aware that FTX funds had been made available for the venture capital firm’s investments.

In a transcript of the proceedings for her plea deal in the Southern District of New York released Dec. 23, Ellison acknowledged the financial ties between FTX and Alameda that were central to prosecutors’ case against former FTX CEO Sam Bankman-Fried. According to Alameda’s former CEO, Alameda had access to a “loan facility” through FTX from 2019 to 2022.

“I understood that FTX managers had implemented special settings on Alameda’s FTX.com account that allowed Alameda to maintain negative balances in various fiat currencies and crypto currencies,” said Ellison. “In practice, this arrangement gave Alameda access to an unlimited line of credit with no need to deposit collateral, no interest to be paid on negative balances, and no margin calls or FTX.com’s liquidation protocols. She added:

“If Alameda’s FTX accounts had significant negative balances in a particular currency, it meant that Alameda was borrowing money that FTX’s clients had deposited on the exchange.”

Ellison’s statement included allegations that Bankman-Fried and other FTX executives had borrowed money from Alameda and used FTX funds to repay “loans worth several billion dollars.” She said most FTX clients had expected their money to be used for this purpose, and both she and Bankman-Fried signed “materially misleading financial statements” to Alameda lenders — knowing it was illegal.

“I’m really sorry for what I did,” Ellison said. “I knew it was wrong.”

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Ellison’s plea deal, released Dec. 21, has largely spared the former Alameda CEO from many of the charges currently facing Bankman-Fried, including bank fraud and securities fraud. She could still face criminal charges for criminal tax violations, but the agreement sets a $250,000 bail conditional on her surrendering all travel documents.

US authorities extradited Bankman-Fried from the Bahamas on December 21 after spending more than a week in the country’s Fox Hill prison. Prosecutors let the former FTX CEO go home with an ankle bracelet following a $250 million bond posted by his parents. He is expected to appear in court again on January 5.