In her first day of her testimony against FTX founder and ex-boyfriend Sam Bankman-Fried, former Alameda Research CEO Caroline Ellison revealed just how closely FTX and its sister trading firm were intertwined, especially when it came to the flurry of “Sam coins” either created or supported by SBF.
Ellison revealed that FTT, the most important of the so-called Sam coins and FTX’s native cryptocurrency, was propped up from the beginning by Alameda Research—and at Bankman-Fried’s direction. Alameda similarly had large holdings of Serum, MAPS, OXY, and Solana.
The public-facing idea behind the FTT token was to provide FTX customers who bought it discounts on trading fees and other rewards, but Ellison explained that Bankman-Fried had different motives. Before SBF created FTT in 2019, Alameda had trouble getting loans. Statements from company insiders during SBF’s ongoing trial have confirmed that Alameda had a multibillion-dollar line of credit with FTX, but in 2018, the exchange’s customer funds weren’t enough to help fuel Alameda’s business.
Bankman-Fried created FTT because it would be a good way to “raise some funds and build an equity cushion for FTX,” according to Ellison. After creating FTT and taking it public, Alameda was able to get loans much more easily. And for FTT to remain useful, its price needed to stay high.
Just before releasing FTT, the company sold the token to investors in an early funding round at about 10 cents per token. Other insiders, including FTX executives and SBF himself, received a share of the tokens, but, according to Ellison, between 60% and 70% of the initial distribution went to Alameda Research.
Once released on public markets, FTT quickly jumped to $1—a price that SBF directed Alameda to maintain with an influx of investment.
"He said that he thought $1 was a psychologically important price," Ellison testified on Tuesday, "and if it went below a dollar, then people might lose confidence in it, so that we should try to buy it if it started going below a dollar."
In 2021, when Binance—which had received FTT as an early investor in FTX—started to offload some of its holdings, SBF told Ellison to start buying the token once the price started decreasing.
“At various points he—he gave us a lot of instructions about FTT," Ellison said, referring to Bankman-Fried. "At various points he instructed us to buy if there was a large amount of selling or if the price was going down too much."
She added that Alameda’s FTT purchases were meant to stay between her and SBF, along with a few unspecified others. A message from July 2021 presented as evidence in court showed Ellison apologizing for being “cagey” with then Alameda trader Victor Xu during a discussion about buying FTT. Xu wanted Alameda to wait until the price of FTT dropped further, to maximize potential profits, but Ellison pushed back because SBF wanted FTT bought at a certain price.
Ultimately, Ellison ignored Xu, and Alameda maintained the price of FTT, but lost money in doing so. Ellison told Xu in the message that she was nervous because of SBF’s past reactions to broaching the subject.
“FTT price is definitely something SBF’s gotten upset at me for talking too publicly about before so I was feeling stressed out about that/struggling how to respond,” she wrote to Xu via the encrypted messaging app Signal.
Eventually, the price of an FTT token rose to $50, a boon for Alameda. SBF told Ellison that the company should start putting the value of Alameda’s FTT holdings on its balance sheet to help it obtain loans from third-party lenders.
Ellison said she thought it was misleading to add the value of Alameda’s FTT holdings to its balance sheet because selling large amounts of FTT would cause the coin’s price to decrease, and it would therefore decrease the total value of its holdings. She and SBF agreed that if they broke out FTT as a separate entry on the balance sheet it would be okay.
The strength of FTT and the other Sam coins—Serum, MAPS, OXY, and Solana—on Alameda’s balance sheet helped it secure hundreds of millions of dollars in loans from lenders, including now-bankrupt Genesis.
But an analysis Ellison performed for Bankman-Fried in fall 2021 of Alameda’s net asset value (assets minus its liabilities) showed that without Alameda’s Sam coins, it was in the red some $2.7 billion. Ellison said that even if Alameda tried to sell off its roughly $10 billion in Sam coins, there likely wouldn't be enough demand.
"If we actually tried to go out and sell all these coins in the market," she testified, "we would end up getting a lot less."
