Caroline Ellison alleges Changpeng Zhao's tweet 'contributed' to FTX's demise

By: Michael Wilson

October 13, 2023 8:09 AM

The previous Alameda Research CEO blamed CZ for FTX's failure, while the Binance CEO blamed Ellison's offer to buy the company's FTT assets.

According to Caroline Ellison, former CEO of Alameda Research, a single tweet from Binance CEO Changpeng "CZ" Zhao contributed to the failure of the cryptocurrency exchange FTX.

Ellison reportedly blamed CZ's social media activities for the failure of FTX while testifying in Sam "SBF" Bankman-Fried's criminal trial on Oct. 12. CZ declared on X (previously Twitter) on November 6, 2022, that Binance would be liquidating its holdings of FTX Token (FTT) "due to recent revelations that have come to light." 

According to numerous reports, the token liquidation prompted retail investors to follow Binance's lead and withdraw cash from FTX. The platform's run resulted in FTX suspending withdrawals and declaring bankruptcy on November 11.

Although the tweet "contributed" to FTX's demise, the major reason, according to Ellison, was Alameda borrowing $10 billion from the exchange "it couldn't repay." On Oct. 10, she testified for the first time in SBF's trial, claiming that Bankman-Fried authorized her to have Alameda take billions of dollars from FTX without the users' authorization.

In a Dec. 6 thread, CZ responded to charges that one of his tweets "destroyed FTX" by asserting, "No healthy business can be destroyed by a tweet." He cited Ellison's own social media activity from November 6, alleging that Alameda's offer to buy Binance's FTT holdings "was the real cause for people to dump" the tokens.

The former Alameda CEO's testimony at trial included Bankman-Fried's apparent desire to become President of the United States, the creation of multiple "alternative" spreadsheets of Alameda's financials to present to Genesis, and SBF's interest in Saudi Crown Prince Mohammed bin Salman as a potential backer of the exchange. On cross-examination by defense counsel Mark Cohen, her testimony seemed to center on Bankman-Fried's knowledge of Alameda's operations.

Ellison said under questioning from Cohen that she "might have said that [SBF] might not have known" about her concerns about "putting FTX customers' funds at risk." Assistant United States Attorney Danielle Sassoon described the claim as "vague."

Ellison testified on the seventh day of SBF's criminal trial, which started on October 3. She was among the first FTX and Alameda insiders to plead guilty as part of a deal with US investigators in exchange for her testimony.

Bankman-Fried has pled not guilty to seven criminal accusations in his first trial, which is scheduled to last until November. In a March 2024 trial, he will face an additional five counts.