The collapse of the Sam Bankman-Freed FTX cryptocurrency exchange has led to heightened scrutiny of the role Alameda Research and its CEO Caroline Ellison played in the firm’s demise.
Ellison, 28, was raised by two MIT economists and graduated from Stanford University with a degree in mathematics. She met Bankman-Freed at the trading firm Jane Street Capital. Bankman-Fried, like Ellison, was raised by professors, and the couple adopted a philosophy of “effective altruism,” which involves earning large sums of money to fund charitable activities that bring maximum benefit to society. According to CoinDesk, the two have been reportedly involved in relationships from time to time.
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When Bankman-Fried left Jane Street in 2017 to start his own hedge fund known as Alameda Research, Allison joined shortly thereafter in what she called a “blind leap into the unknown.” She became one of the top traders at the new firm and said on an FTX podcast that joining Alameda was “too cool an opportunity to pass up” but dealing with capital was “pretty tough” when she first started at firm. in 2018.
“It was basically something I wasn’t used to thinking about,” she said. “So it was kind of like – I don’t know, I guess I was a trader, I mean, not that long on Jane Street, but a year and a half, which was more trading experience than a lot of Alamedas. At that time, traders had this. I kind of wanted to come in and be an expert on everything, but there were still a lot of things in the crypto world that I didn’t know anything about.”
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According to the Wall Street Journal, Alameda was a major cryptocurrency trader and often traded on the FTX platform. Although Bankman-Fried was the founder and majority owner of Alameda, he eventually relinquished control of its operations and focused primarily on his role as CEO of the FTX cryptocurrency exchange, which he founded in 2019. At its peak, FTX was valued at about $32. billion and was the third largest cryptocurrency exchange in the world by volume.
The fast-paced atmosphere and rapid growth of both Alameda and FTX put more pressure on those at the helm. The Wall Street Journal previously reported that stimulant use was common among Bankman-Fried’s upper echelons. Ellison tweeted last year, “Nothing makes you appreciate how stupid many normal, non-drug human experiences are like regular amphetamine use.”
In October 2021, Ellison was named co-CEO of Alameda along with Sam Trabucco. She became CEO in August 2022 when Trabucco announced on twitter he stepped down from the role. Trabucco said directing Alameda alongside Ellison was “difficult, exhausting and exhausting” but added that he “would remain an adviser”.
Cryptocurrency prices were close to all-time highs in the fall of 2021, but in early 2022, digital currency prices plummeted and many investment and lending firms in the sector faced financial pressure.
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By early November of this year, Alameda and FTX’s financial announcements were on the rise. Rival cryptocurrency exchange Binance has canceled a preliminary plan to acquire FTX after due diligence revealed that Binance CEO Changpeng Zhao called the balance sheet “chaotic” in an interview with Fox Business’s Susan Li.
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The intertwined relationship between the two firms eventually led to their collapse as FTX loaned billions of dollars in client funds from the exchange to Alameda to bolster the firm’s financial position. When worried investors went to withdraw funds from FTX, it was unable to meet these requirements and became insolvent.
During a hangout earlier this month before the firm and FTX filed for bankruptcy, the Wall Street Journal reported that Allison informed Alameda employees that FTX was using customer funds to help Alameda meet its obligations, and added that she , Bankman-Fried and other members of the firm’s management were aware of the decision.
Kayla Bailey of Fox Business and Aislinn Murphy contributed to this report.