Caroline Ellison Blames CZ for FTX’s November Collapse
- Many believe that CZ and Bankman-Fried shared an intense rivalry, with both parties seeking to outshine the other.
- Ellison claims that CZ’s tweets inspired a run on FTX.
- Bankman-Fried’s lawyers said Ellison’s decisions were impacted by her emotions towards Bankman-Fried.
During the third day of her appearance as the prosecution’s star witness, Caroline Ellison claimed Binance CEO Changpend “CZ” Zhao played a role in the dramatic November 2022 collapse of the FTX exchange.
The former Alameda Research head believes CZ’s infamous tweet on November 6, where he announced that Binance would liquidate its FTT tokens due to “recent revelations,” caused panic among retail investors.
Several FTX investors sought to follow Binance’s steps in withdrawing their funds, leading to a run on the exchange. FTX later paused withdrawals and filed for bankruptcy on November 11. While Ellison admitted that FTX’s core problem was Alameda’s inability to repay the $10 billion loan from FTX, she claimed CZ’s social media activities played a role.
CZ has since denied claims that his tweet was the final blow to his rival, FTX. He claimed in a previous tweet that “no healthy business can be destroyed by a tweet.” Binance and FTX were two of the biggest rivals in the crypto market prior to the latter’s collapse.
Ellison’s testimony has shed light on the inside activities that led to the FTX’s demise. She admitted to committing fraud alongside other activities, but her testimony points to Bankman-Fried as the core culprit. She claimed the 31-year-old ran both FTX and Alameda Research despite installing her as the latter’s CEO.
Interestingly, the defense team believes Ellison was the true leader at Alameda and the main cause of the company’s failures. Bankman-Fried’s attorney, Mark Cohen, suggested that Ellison allowed her failed relationship with Bankman-Fried to affect their communication.
Cohen asked Ellison:
After you and Mr. Bankman-Fried broke up for the last time, did it affect your ability to communicate with him?
Ellison admitted that their breakup was a concern in their professional relationship. She said she found it “difficult to have in-person, one-on-one conversations with him” and “tried to avoid those and avoid much time with him in social settings.” She added that she “continued to have work communications with him over Signal.”
Cohen further suggested that Ellison’s emotions towards Bankman-Fried could have affected her business decisions, such as her resistance to investing in the crypto trading firm Modulo. Reports state that Modulo was operated by one of Bankman-Fried’s former lovers.
Ellison said Bankman-Fried falsely blamed her for Alameda’s downfall. But she claimed Alameda’s dependence on loans was its main undoing. The crypto hedge fund relied on loans to operate and ran into trouble when customers demanded their loans.
Ellison has already pleaded guilty to wire fraud charges and conspiracy charges. Her testimony is allegedly part of a deal with the prosecutors.
Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.
