Caroline Ellison Alleges Changpeng Zhao’s Tweet Played a Role in FTX Collapse

In a dramatic turn of events in the ongoing criminal trial of Sam “SBF” Bankman-Fried, former Alameda Research CEO Caroline Ellison has pointed a finger at Binance CEO Changpeng “CZ” Zhao, suggesting that one of his tweets played a significant role in the downfall of the cryptocurrency exchange FTX.

Ellison, testifying on October 12, claimed that CZ’s tweet on X (formerly Twitter) dated November 6, 2022, had contributed to the collapse of FTX. In the tweet, CZ announced Binance’s decision to liquidate its holdings of FTX Token (FTT) due to “recent revelations.” This announcement reportedly triggered a chain reaction among retail investors, leading them to follow Binance’s lead and withdraw funds from FTX. The mass exodus forced FTX to halt withdrawals and ultimately file for bankruptcy on November 11.

Although Ellison acknowledged the impact of CZ’s tweet, she argued that the primary reason for FTX’s collapse was Alameda’s inability to repay the $10 billion it had borrowed from the exchange. According to her testimony, Bankman-Fried had directed her to take billions of dollars from FTX without users’ consent.

CZ vehemently denied the accusation that his tweet had “destroyed FTX.” In a response thread on December 6, he asserted that a robust business could not be ruined by a single tweet. Instead, he pointed to Alameda’s own social media activity on November 6, specifically mentioning Alameda’s offer to buy Binance’s FTT holdings, which he claimed had prompted the token sell-off.

During her testimony, Ellison provided a wealth of information about Bankman-Fried’s aspirations, including his desire to become the President of the United States. She also revealed details about Alameda’s financial operations, presenting alternative financial spreadsheets to Genesis. Additionally, she mentioned SBF’s interest in securing support for the exchange from influential figures like Saudi Crown Prince Mohammed bin Salman.

Under cross-examination by defense counsel Mark Cohen, Ellison admitted that she had previously expressed concerns about potentially jeopardizing FTX customers’ funds. However, Assistant U.S. Attorney Danielle Sassoon deemed her claim “vague.”

Ellison’s testimony occurred on the seventh day of Bankman-Fried’s criminal trial, which commenced on October 3. As one of the first insiders from FTX and Alameda to plead guilty as part of a cooperation agreement with U.S. authorities, Ellison’s revelations have added significant intrigue to the ongoing legal proceedings. Bankman-Fried has pleaded not guilty to seven criminal charges in his current trial, which is anticipated to continue through November. He will face an additional five counts in a separate trial scheduled for March 2024.

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