Caroline Ellison Blames SBF and Admits Alameda Reporting Is Confusing
The former CEO of bankrupt algorithmic trader Alameda, Caroline Ellison, told the judge she voluntarily agreed with former FTX CEO Sam Bankman-Freed (SBF) to provide "materially misleading financial statements to Alameda's lenders." According to her Dec. 19 court transcript, Ellison told U.S. District Court Judge Ronnie Abrams, “I am truly sorry for what I did—I knew that it was wrong.” These are quarterly balance sheets, which deliberately excluded both Alameda's credit debt and the billions of dollars that the company provided in the form of loans. "I agreed with Mr. Bankman-Fried and others not to publicly disclose the true nature of the relationship between Alameda and FTX, including Alameda's credit arrangement." — Allison stated. In fact, the investigators' assumption that FTX enjoyed special treatment for Alameda and was free to withdraw money from its subsidiary's accounts turned out to be correct: “I understood that FTX executives had implemented special settings on Alameda's FTX.com account that permitted Alameda to maintain negative balances in various fiat currencies and crypto currencies. In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having to pay interest on negative balances and without being subject to margin calls or FTX.com's liquidation protocols.” Thus, when Alameda emptied its credit accounts, the company replenished them with FTX customer funds and vice versa. Genius plan...
Gary Gensler from SEC Warns of Tighter Crypto Regulation Imminent
The chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, said that after the scandalous bankruptcy of FTX, the government is obliged to take tough measures against the crypto industry and intends to equate crypto companies that do not comply with the conditions of regulators to casinos. In addition, Gensler says that the rhetoric popular among cryptocurrency exchanges, arguing for the presence of reserve assets to reimburse user funds in case of emergency, does not guarantee anything, since this practice does not meet current regulatory disclosure standards: "Proof of reserves is neither a full accounting of the assets and liability of a company, nor does it satisfy segregation of customer funds under the securities laws." Regulators should focus on ensuring that crypto companies separate their funds from those of their clients, and keep an accurate record of all transactions, Gensler said. Moreover, this should be done in accordance with the time-tested rules of storage, separation and "same old"accounting.