From public court transcripts:
(source)
From approximately March 2018 through November 2022, I worked at Alameda Research, a cryptocurrency trading firm principally owned by Sam Bankman-Fried. At Alameda Research, I first worked as a cryptocurrency trader and was later appointed by Mr. Bankman-Fried as the co-CEO and eventually CEO of Alameda Research Ltd., the subsidiary that housed the firm's main trading and market making operations. In those roles, I reported to Mr. Bankman-Fried.
From 2019 through 2022, I was aware that Alameda was provided access to a borrowing facility on FTX.com, the cryptocurrency exchange run by Mr. Bankman-Fried. I understood that FTX executives had implemented special settings on Alameda's FTX.com account that permitted Alameda to maintain negative balances in various fiat currencies and crypto currencies. In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having to pay interest on negative balances and without being subject to margin calls or FTX.com's liquidation protocols. I understood that if Alameda's FTX accounts had significant negative balances in any particular currency, it meant that Alameda was borrowing funds that FTX's customers had deposited onto the exchange.
While I was co-CEO and then CEO, I understood that Alameda had made numerous large illiquid venture investments and had lent money to Mr. Bankman-Fried and other FTX executives. I also understood that Alameda had financed these investments with short-term and open-term loans worth several billion dollars from external lenders in the cryptocurrency industry. When many of those loans were recalled by Alameda's lenders in and around June 2022, I agreed with others to borrow several billion dollars from FTX to repay those loans. I understood that FTX would need to use customer funds to finance its loans to Alameda. I also understood that many FTX customers invested in crypto derivatives and that most FTX customers did not expect that FTX would lend out their digital asset holdings and fiat currency deposits to Alameda in this fashion.
From in and around July 2022 through at least October 2022, I agreed with Mr. Bankman-Fried and others to provide materially misleading financial statements to Alameda's lenders. In furtherance of this agreement, for example, we prepared certain quarterly balance sheets that concealed the extent of Alameda's borrowing and the billions of dollars in loans that Alameda had made to FTX executives and to related parties. I also understood that FTX had not disclosed to FTX's equity investors that Alameda could borrow a potentially unlimited amount from FTX, thereby putting customer assets at risk. I agreed with Mr. Bankman-Fried and others not to publicly disclose the true nature of the relationship between Alameda and FTX, including Alameda's credit arrangement.
I also understood that Mr. Bankman-Fried and others funded certain investments in amounts more than $10,000 with customer funds that FTX had lent to Alameda. The investments were done in the name of Alameda instead of FTX in order to conceal the source and nature of those funds.
I am truly sorry for what I did. I knew that it was wrong. And I want to apologize for my actions to the affected customers of FTX, lenders to Alameda and investors in FTX. Since FTX and Alameda collapsed in November 2022, I have worked hard to assist with the recovery of assets for the benefit of customers and to cooperate with the government's investigation. I am here today to accept responsibility for my actions by pleading guilty.
(source)
I want to start by saying how sorry I am. I want to apologize most of all to the victims, to all the customers, lenders and investors who lost money as the result of my actions. I also want to apologize to FTX and Alameda employees who lost their jobs, to my family and friends, and to everyone I lied to or misled over the course of my time in Alameda. It's been almost two years since the collapse of FTX and not a day goes by when I don't think about all the people I've hurt.
The human brain is bad at truly understanding big numbers. I ran into this a lot when I worked at Alameda and had to make decisions involving millions or billions of dollars. So I think on some level my brain can't even truly comprehend the scale of the harms I've caused. That doesn't mean I don't try. So to all the victims and everyone I harmed directly or indirectly, I am so, so sorry. I can't even begin to imagine the pain I must have caused to so many of you. I have participated in a criminal conspiracy that ultimately stole billions of dollars from people who put their trust in us. We abused that trust in the worst possible way, and I am deeply ashamed of what we've done. Without excusing my actions, I want to try to offer an explanation of how I ended up doing this.
If you had told me back in 2018 that in just a few years I would find myself pleading guilty to fraud, I would life told you that you were crazy. I've always thought of myself as an honest person, as someone with integrity, and as someone who tries to do the right thing and to help others. But at Alameda, I gradually found myself drifting away from the kind of person I wanted to be. The longer I worked at Alameda, the more my sense of self became inextricably intertwined with what Sam thought of me and the more I subordinated my own values and judgment to his own. Work increasingly became my life, and I was surrounded by other FTX employees and isolated from the rest of my friends and family. The culture that promoted positivity and discouraged worries and criticism made it hard for me to be a dissenting voice.
At each stage of the process, it felt harder and harder to extricate myself and to do the right thing. There were times when I wanted to confide in someone on the outside about what was going on, but every time I thought about it, I heard Sam's voice in my head from past times he had admonished me for sharing information about Alameda too freely, even within the company. Ignoring that voice in my head and speaking out would have been brave. I'm sorry I wasn't brave.
I've had a lot of time in the past two years to think about how to move on from this and what to do now. For many years, it was my dream to do something really good for the world. Now I know that achieving that dream will be much harder, but I don't think that means I should give up. For one thing, I found it meaningful to tell the truth about everything that happened. Lying isn't something that comes naturally to me, and the pressure I felt to lie over the years I was at Alameda was often a great source of stress. Since the collapse of FTX, it's been a relief to be able to be completely honest and open with investigators, prosecutors, and the Court about everything. I know it isn't much, but cooperating fully feels like the least I can do for the victims.
And for another thing, I found meaning in just trying to be a good person every day in small and normal ways. If I can help a family get the tax credits they're entitled to or help a student get her high school equivalency diploma or send a book that will brighten an incarcerated person's day, these things may just be grains of sand on the cosmic scale, but at least they're moving it in the right direction.
Finally, I have some people I want to thank. Lots of people in my life have been angry at what I've done or disappointed in my actions. Many have wanted to end their friendship or association with me. I don't blame them one bit. But I do appreciate immensely the people who have supported me: My family who is here today and has been completely unwavering; my partner, I don't know how I could have done any of this without you; everyone who has written me a letter of support; my old friends who stuck by me and new friends who have been incredibly kind and welcoming; the people I volunteered with who have made me feel like a valued member of the team; those with criminal records who have turned their lives around and opened up to me and shared their stories, you guys are an inspiration; the man I served food to in a soup kitchen who told me that with what I was going through, he figured I might need a friend. To all of you, your support and faith in me means more than words can say. Whatever happens here today I will spend the rest of my life trying to be worthy of it.
(source)
p. 643 — the opening:
Q. When you were working at Alameda, did you commit any crimes?
A. Yes, we did.
Q. When you say "we," who do you mean by "we"?
A. I mean Sam and I and others.
Q. What kinds of crimes did you commit with Sam?
A. Fraud, conspiracy to commit fraud, and money laundering.
Q. Who did you defraud?
A. The customers of FTX, the investors in FTX, and lenders to Alameda.
p. 650
Q. While you dated what, if anything, did the defendant tell you about his professional goals?
A. He was very ambitious. He talked about wanting Alameda and eventually FTX to be successful and to end up being huge companies that did a wide variety of things. He was also very interested in politics and talked about wanting to use his money to have influence on politics. He said at one point he thought there was a 5 percent chance he would become president some day.
p. 662
Q. How did you know that Alameda was spending customer money and not just FTX revenue?
A. I mean, initially, when we started borrowing money, we would borrow coins that I knew FTX didn't have on its balance sheet, like relatively illiquid assets. Later on, once we started borrowing in the billions of dollars, I knew that our borrowing exceeded the total amount of money that FTX had from its revenue and from its fundraising so I knew that some of what we were borrowing at least had to be customer funds.
p. 664
Q. The concerns that you just described having, did you ever voice them to the defendant?
A. Yeah. I remember one conversation that we had about when FTX was first being audited, when I asked him whether this line of credit would show up on the FTX audit because I was concerned that, you know, it would raise concerns with investors and other people who were seeing the audit, and he said, like, No, don't worry, the auditors aren't going to look at that.
p. 763