Inside The Last Moments Before FTX Collapsed: ‘Holy S–T, The Company Is Probably Broke’ By Truth Press | Published 24 September 2023
A former software engineer who worked at cryptocurrency exchange FTX’s sister trading firm, Alameda Research, has told of the moment he realized it was about to go collapse, after a company credit card used to order takeout wouldn’t go through.
It was November last year when Aditya Baradwaj was working in the firm’s Hong Kong offices awaiting news of FTX’s fate after the $32 billion company filed for bankruptcy.
Workers at the firm had long been showered with extravagant perks thanks to 31-year-old FTX CEO Sam Bankman-Fried.
As colleagues waited anxiously for news of what was happening, on November 9, 2022, the group decided to order food – but to their shock the card was declined.
It signaled the beginning of the end for the troubled trading company.
‘We ordered our lunch in the afternoon, same as usual. When we went to order our food in the evening, the app says “credit card declined.” That’s the moment where we realized, holy s**t, the company is probably broke,’ Baradwaj told the New York Post.
‘We were afraid. This thing was making international news. My friends and family were calling me, I’m getting all these calls. I’m sitting in a hotel in Hong Kong, and I don’t want to get thrown in Chinese jail.’
Just how desperate the situation had become was made shockingly clear when Caroline Ellison, CEO of Alameda Research and Bankman-Fried’s ex- girlfriend held a company-wide meeting.
Some workers joined via video link while others sat on bean bags in the office as Ellison broke down in tears.
‘I guess, mostly I wanna say, like, I’m sorry. This really sucks,’ Baradwaj recalls 28-year-old Ellison as she cried.
‘I think my current default plan is that Alameda will likely wind down once we can, like, repay all of our creditors and sort of wind down a bunch of our, like, whatever remaining obligations we have,’ Ellison explained to the gathered workers.
‘Who made the decision on using [FTX] user deposits?’ one Alameda employee asked Ellison.
‘Um…Sam, I guess,’ she responded.
Ellison’s conversation with the employees is likely to play a pivotal role in the upcoming federal trial that sees Bankman-Fried facing charges of allegedly embezzling billions of dollars in customer funds.
‘After that meeting, we all left the office, and we never spoke to Caroline after that,’ Baradwaj said. ‘Caroline even attempted to strike up a conversation with someone, and she was ignored. No one wanted to engage with her.’
‘He’s definitely guilty. We know he’s guilty because Caroline basically admitted it, and this was back in mid-November, in the heat of the moment, before she had consulted any lawyers, even before the bankruptcy. She confessed to us, and there’s a recording of the confession,’ Baradwaj explained to The Post.
‘In my mind, there was one central event, which is Caroline’s confession,’ Baradwaj stressed.
On the day of the meeting there was no capital available for trades and no guidance coming from Bankman-Fried over how to proceed.
As soon as the meeting ended, Baradwaj along with his blindsided colleagues quickly made plans to leave the country and get out of Hong Kong.
Two days later, on November 11, FTX, Alameda and its affiliated entities filed for bankruptcy.
Until the final meeting, Baradwaj said Ellison had been a kind person and an effective manager, forgiving of errors and someone who looked to create a pleasant social environment within the company.
‘My impression of Caroline, right up until the very end when she confessed to us what they’d been doing, was that she was a good boss,’ Baradwaj said. ‘She seemed like a kind person.’
Ellison has since pleaded guilty to fraud charges, and is expected to testify against Bankman-Fried.
In her writings, she has described feeling ‘unhappy and overwhelmed’ with her job and ‘hurt/rejected’ from a breakup with Bankman-Fried.
Ellison told a New York court last year that she ran Alameda Research and essentially had access to an ‘unlimited’ amount of FTX client money.
She confessed she agreed with Bankman-Fried to give ‘materially misleading financial statements’ in order hide the arrangement – which she knew was illegal.
The first signs of trouble began to occur one week earlier on November 2 when a leaked Alameda Research balance sheet drew questions about FTX and its affiliates solvency, setting off a wave of withdrawals.
At one stage, Ellison is said to demanded Alameda’s traders withdraw capital from other exchanges in order to ensure FTX was able to meet the withdrawal requests.
‘Her urgency in delivering this message was unlike anything we had ever seen from her before. We could sense that something was amiss. We had never before needed to drain capital from the exchanges we traded on and essentially halt our trading activities,’ Baradwaj explained.
Poster Comment:
It has taken nearly a year for this debacle to come out in the open.
Bankman-Fried is like a mini-Madoff.