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Caroline Ellison: Secret recording offers trove of explosive revelations

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The ongoing trial of former FTX CEO Sam Bankman-Fried has uncovered a series of explosive revelations in the form of testimonies from former key FTX and Alameda Research executives. 

The latest court proceedings on Oct. 12 saw former Alameda CEO Caroline Ellison testify for the third day, following which the jury was presented with a recording of a meeting she held with Alameda staffers on Nov. 9, 2022, just days before the collapse of the FTX empire.

The meeting, held in Hong Kong and joined by nearly half of Alameda’s employees, was the key moment Ellison came clean about the ongoing scenario with the crypto exchange to her colleagues. This admission was accompanied by explosive revelations about Alameda’s financial relationship with FTX. Cointelegraph has obtained access to the secret recording, and we have curated a list of four striking elements it revealed.

Alameda’s bad investments led to the financial crisis at FTX

The first and most crucial revelation came early in the meeting when Ellison revealed that Alameda had borrowed money from FTX for a year. She admitted that Alameda had made several illiquid investments using the borrowed funds.

Due to the market downturn, Alameda’s loan positions were called in, creating a shortfall in FTX’s balance sheet. Here’s an excerpt from the discussion:

“Most of Alameda’s loans got called in in order to meet those loan recalls. We ended up borrowing a bunch of funds on FTX, which led to FTX having a shortfall in user funds. And so with the, once there started being like FUD about this and users started withdrawing funds.”

Ellison revealed that Alameda’s bad loans created market panic around FTX, causing users to withdraw their funds. FTX then paused withdrawals to contain the situation, and the exchange came crashing down within days.

FTX planned to raise more funds to compensate users

When one of the employees attending the meeting asked Ellison how FTX intended to pay back its customers, Ellison said that the crypto exchange was planning to raise further funds to fill the gap.

“Basically, FTX is trying to raise in order to do this [compensate users], but yeah, after the crash, no one wanted to invest. I don’t know, obviously, in retrospect, the plan of waiting around for several months and like for the market environment to get better and then raise.”

During the court proceedings on Thursday, Christian Drappi, a former software engineer at Alameda who was present during the meeting, told the court that Ellision’s response about paying back customers sounded concerning to him because he wasn’t aware of a scenario where investors have contributed to making customers whole due to bad financial decisions of the company.

The nervous laughter

As the secret recording was played in the court, the former Alameda employee also pointed out that Ellison had giggled during the meeting. The employee suggested this was Ellison’s “nervous laughter,” something she often did when in a tight spot.

Related: Changpeng Zhao’s tweet ‘contributed’ to collapse of FTX, claims Caroline Ellison

When Ellison was asked by a staffer at the meeting whose idea it was to plug Alameda’s loan losses with FTX customer money, she responded with, “Um, Sam, I guess,” and giggled.

Alameda almost always had access to user’s funds at FTX

Another staffer enquired about the backdoor access of Alameda to FTX and asked how long Alameda had been using FTX customers’ funds to bridge holes in its balance sheet. Ellison responded, “FTX basically always allowed Alameda to borrow user funds, as far as I know.”

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

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BTC price holds 6% gains as Bitcoin battles for ‘crucial’ $28K support

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Bitcoin (BTC) passing $28,000 hints at bullish sentiment, but reclaiming it for good is essential, analysis says.

In an X (formerly Twitter) post on Oct. 17, Yann Allemann and Jan Happel, co-founders of on-chain analytics firm Glassnode, described the $28,000 mark as a “critical milestone” for the BTC price.

Glassnode: “Keep an eye out” for $28,000

After snap volatility, which caused Bitcoin to hit $30,000 for the first time since August, the largest cryptocurrency has managed to preserve some of its gains.

At the time of writing, BTC/USD is circling $28,500, per data from Cointelegraph Markets Pro and TradingView — still up around 6% since the weekly open.

For Allemann and Happel, the pair is now at a defining crossroads.

“The crypto market is hinged on BTC’s ability to breach and consistently maintain a value north of $28k,” part of their commentary stated.

$28,000 has formed a battleground ever since Bitcoin first crossed it in early 2021, and liquidity has traditionally surrounded it as bulls and bears fight to secure control over long-term trajectory.

Data from the trading suite DecenTrader, among others, confirms that the status quo remains despite recent BTC price moves, with $28,000 lying in a zone between major longs and shorts of varying leverage.

Bitcoin liquidity data. Source: DecenTrader

“While this pivotal milestone was momentarily attained on futures, the spot market price peaked at $27.98k earlier today. It’s evident just how crucial this price point is in the larger scheme,” Allemann and Happel added.

“The rapid movements and these price thresholds aren’t just numbers. They signify investor sentiment, market dynamics. Keep an eye out for the 28k level.”

BTC/USD 1-day chart. Source: TradingView

Road to Bitcoin halving contested

As Cointelegraph reported, predictions over what the future will bring for Bitcoin both before and after its next block subsidy halving in April 2024 differ considerably.

Related: Mining BTC is harder than ever — 5 things to know in Bitcoin this week

In an interview last month, DecenTrader co-founder Filbfilb eyed BTC price galvanizing itself for upside during Q4, possibly reaching $46,000 by the halving.

Some well-known market participants, however, remain risk-averse. Among them, popular trader Crypto Tony and others are betting on a pre-halving return to $20,000 for a final local bottom.

“Many can scream they are long right now and caught that move, but if your not taking profit here at resistance your doing something wrong,” he told X subscribers about the recent surge.

“I personally will not be long unless we flip that $28,500 level into support.”

BTC/USD annotated chart. Source: Crypto Tony/X

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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Ripple job posting hints at possible IPO, XRP community says

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Fintech payments company Ripple released a new job posting on Oct. 16 for a shareholder communications senior manager across multiple locations in and outside the United States. The job posting prompted many crypto enthusiasts to label it as an official hint about the company’s plans to go public.

The job posting outlines that the role will require direct communication with shareholders — a concept generally associated with publicly traded companies. The chosen candidate would be responsible for developing and implementing communication and relationship management strategies for “existing and prospective investors, current shareholders, and financial analysts.”

The job description emphasizes the candidate’s need to create strategic plans specifically suited for situations like “M&A [mergers and acquisitions], investments, liquidity events, and other high-impact moments.“

The role includes creating investor-focused materials like “presentations, fact sheets, case studies, and analyses“ to inform and educate potential investors about the company’s prospects and performance — a necessary component of the initial public offering (IPO) preparation process. The responsibilities of the post also include maintaining a shareholder database and managing routine communications like quarterly updates.

Related: How are crypto firms responding to US regulators’ enforcement actions?

Many XRP (XRP) proponents and the pro-Ripple community on X (formerly Twitter) are referring to the job posting as a hint that there may be an IPO. Some key executives from the company have also alluded to the possibility that Ripple might go public but haven’t given any indication of timing.

The crypto-focused payments company has recently been in the limelight due to the U.S. Securities and Exchange Commission’s (SEC) lawsuit alleging XRP is a security. Ripple scored a major win in the lawsuit in July when a judge ruled that XRP is not a security in terms of sale on digital asset exchanges.

Key Ripple executives have claimed that even though the SEC lawsuit has cost them many business opportunities in the U.S., most of its remittance business lies outside America.

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Banks’ crypto exposure must be disclosed — BIS’ Basel Committee

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The Basel Committee on Banking Supervision of the Bank for International Settlements (BIS) released a consultation paper on Oct. 17, proposing to make it compulsory for banks to disclose their crypto exposure.

The Basel Committee comprises central banks and financial authorities from 28 jurisdictions and is a forum for regulatory cooperation on banking supervisory matters. The latest consultation paper is based on the disclosure guidelines in the final prudential standard on how banks should handle their exposure to crypto assets released in December 2022.

The consultation paper aims to set a standardized “disclosure table and set of templates for banks’ crypto-asset exposures,” with a proposed implementation date of Jan. 1, 2025. The Basel Committee has opened the proposal for public comment until Jan. 31, 2024, after which the results will be published on its website.

Under the new proposed regulations, banks would be required to provide quantitative data on exposures to crypto assets and the corresponding capital and liquidity requirements. Banks would also be required to offer qualitative data on their activities linked to cryptocurrencies.

Additionally, banks would be required to offer information on the accounting classifications of their exposure to crypto assets and liabilities. In its proposal, the committee claimed that using a uniform disclosure format will encourage the application of market discipline and lessen information asymmetry between banks and market participants.

Related: Ripple joins BIS cross-border payments task force

The committee also reviewed crypto assets and bank exposure in June. At the time, the committee didn’t delve deeply into the topic, mentioning only that it was focusing on permissionless blockchains and the eligibility criteria for “Group 1” stablecoins.

The BIS has been actively involved in crypto consultations and examining the regulatory aspect of decentralized technology. Recently, the BIS and a handful of European central banks published details of a concept to develop a system to track international flows of cryptocurrencies.

Magazine: Blockchain detectives: Mt. Gox collapse saw birth of Chainalysis

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