“That Seems Pretty Bad”: Alameda Employee Quit Shortly After Hearing About FTX Backchannel Loans

In an “all hands on deck” meeting at Alameda Research in November 2022, Caroline Ellison revealed to her co-workers that Sam Bankman-Fried had supposedly authorized a raid on FTX customer cash to repay the company’s loans. 

In the recorded meeting, reported on by Financial Times on Thursday, Alameda software developer Christian Drappi – who testified yesterday – can be heard expressing the type of obvious concern one would have in such a situation. “I’m sure this wasn’t just a Yolo thing,” he said to Ellison in the meeting. 

When asked in the meeting who approved the use of customer funds, Ellison replied: “Um . . . Sam, I guess.”

Drappi testified that he then pressed Ellison about whether or not Alameda borrowed cash via the normal “spot margin book” from FTX, but Ellison told him that the loans had been made through another “special back channel”. 

Drappi replied: “That seems pretty bad” and quit, with other staff members, shortly thereafter. 

It wasn’t long thereafter that Ellison opened up to her staff about how dire the situation with FTX and Alameda was. “I’m sure this is not that fun for you, but I certainly appreciate how open you’ve been,” one employee said to her. 

Recall, before Drappi took the stand, we highlighted Caroline Ellison’s testimony from Thursday, where she detailed more interactions with Alameda employees and how SBF was “freaking out” over not being able to raise cash from the Saudis.

Among the items brought to light on day 3 of her testimony was the claim that SBF wouldn’t let her quit when she wanted to. Ellison said in court: “He said I couldn’t I was too important to Alameda and I should stay at Alameda.”

On Thursday Ellison said she admitted to Alameda employees that the company likely wasn’t going to make it: “A lot of employees had been asking me about what was going on or what the implications was for them. I was hoping that some might stay, but if my goal was to get them to stay, I would have asked them to stay. My goal was to inform Alameda employees what had been going on and what the implications were.”

She detailed more on Thursday about how SBF was “freaking out” about not being able to raise money from Mohammed bin Salman: “He told me he went to the Middle East and tried to raise funds there but it didn’t sound like he had success.” We had detailed in yesterday’s testimony that MBS was one place where FTX was potentially looking to raise capital. 

Ellison again talked about how she was worried about Alameda’s lenders recalling loans in summer 2022. Talking about the 7 alternate balance sheets she used with FTX to lie about the company’s financial position, Ellison said Thursday: “I don’t recall if we discussed all of them, I know we discussed some.”