A 75-minute audio recording secretly made by Caroline Ellison has surfaced, capturing the moment when 15 former employees of Alameda Research discovered that the trading firm had been "borrowing" user funds from FTX. This audio recording provides new insights into the tension and apprehension felt by Ellison and Alameda employees leading up to FTX's collapse.
During a plenary session in Hong Kong on November 9, 2022, Ellison disclosed, "Alameda borrowed a bunch of money through term loans and then used it to make various illiquid investments. So like a bunch of FTX and FTX US stocks." She further explained that most of Alameda's loans were called in, which resulted in them borrowing a substantial amount of funds from FTX, causing a shortage of user funds at FTX. According to Ellison, FTX had consistently permitted Alameda to borrow users' funds.
Another recording from the meeting with former Alameda software engineer Christian Drappi on October 12 forms part of Drappi's witness statement. In this recording, Drappi asks Ellison when she became aware of Alameda's misuse of FTX user deposits and who else at the company knew about it. Initially, Ellison avoided answering, but Drappi pressed her, wondering if it was a "YOLO" decision. This term was explained in court, with Drappi emphasizing that he wanted to confirm that depositing money using FTX was not just a "spontaneous" decision.
Drappi described Ellison's behavior in meetings as "low" and indicative of a lack of confidence in Alameda employees. He expressed shock at the extent of FTX's relationship with Alameda and resigned the next day after learning about it.
Aditya Baradwaj, an Alameda research engineer present at the meeting, described the high tension in the room and how Ellison raised previously undisclosed information, including the abandoned acquisition of FTX by Binance, signaling the company's lack of a future. As a result, many employees felt they had to leave the company.
