The billion-dollar scam that contributed to the downfall of cryptocurrency platform FTX was commissioned by CEO Sam Bankman-Fried. His former partner and close associate Carolyn Ellison said this on Tuesday during the lawsuit filed against the FTX owner.
According to Ellison, Bankman ordered Fried to transfer billions of dollars from cryptocurrency investors to Alameda, a sister company of FTX. This money can be used to repay loans and make investments. Ellison was a boss in Alameda and had an affair with Bankman Fried for a while.
The owner of FTX wanted to use the funds to, among other things, buy out its main competitor Changpeng Zhao. He still had an interest in the multi-billion-dollar cryptocurrency platform, but Bankman Fried feared his rival would use it to harm his company.
But due to the diversion of funds, FTX was no longer able to repay investors’ investments when they wanted to withdraw their money from the company last November. It heralded the downfall of FTX. The authorities then launched an investigation and soon discovered the fraud, after which Bankman-Fried was arrested and put behind bars.
Obsession with a major competitor
According to Ellison, Bankman Fried had no suspicion of misleading investors and was obsessed with his competitor Zhao and his company Binance. Furthermore, the FTX founder reportedly believed that he could one day become President of the United States. Bankman Fried made several donations to the Democratic Party, to which current President Joe Biden belongs.
According to Ellison, it was Bankman Fried who created the systems that allowed Alameda to use investors’ money. “He was also the one who ordered us to use clients’ money to repay the loans,” she said.
FTX was one of the largest cryptocurrency trading platforms. It also had an investment arm and issued its own cryptocurrency: FTT. The company faced major problems in November last year.
Rival Zhao was selling his own financial transaction remittances at the time, saying he suspected FTX was having financial problems. This has caused investors to want to withdraw their money from FTX en masse. But part of that money was transferred to Alameda and has since disappeared.
Victims lost billions
Investors were plunging in billions. The prices of many cryptocurrencies also fell, meaning that investors who did not trade via FTX also lost money. Further investigation revealed that the company’s accounting was a mess.
Bankman accused Fried of fraud and deception, among other things. If proven guilty, he could spend decades behind bars.
The trial is currently underway in a New York court and is likely to last about six weeks. Several people close to Bankman-Fried, including Ellison, have already pleaded guilty and decided to cooperate with justice.
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