The collapse of Sam Bankman-Fried’s FTX cryptocurrency exchange has led to increased attention on the role played by Alameda Research and its CEO Caroline Ellison in the company’s implosion.
Ellison, 28, was raised by two MIT economists and graduated from Stanford with a degree in math. She met Bankman-Fried at the trading firm Jane Street Capital. Bankman-Fried, like Ellison, was raised by teachers, and the couple embraced the philosophy of “effective altruism,” which involves earning large sums of money to fund philanthropic pursuits that benefit society as much as possible. society. The two were reportedly involved in an on-and-off relationship, according to CoinDesk.
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When Bankman-Fried left Jane Street in 2017 to found her own hedge fund known as Alameda Research, Ellison joined him soon after in what she called “a blind leap into the unknown”. . She became one of the new company’s key traders and said in an FTX-linked podcast that joining Alameda was “too cool an opportunity to pass up,” but managing the capital was “a little daunting” when she did. started the business. in 2018.
“Most of the time, it was sort of something that I didn’t usually think about,” she said. “So it was sort of – I don’t know, I guess I was like a trader for, I mean, not that long at Jane Street but a year and a half, which was sort of over trading experience that a lot of Alameda traders had back then, I kind of wanted to come in and be like an expert on everything, but there was still a lot 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 traded frequently 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 crypto exchange FTX, which he founded in 2019. At its peak, FTX amassed a valuation of around $32. billion and was the third largest cryptocurrency exchange in the world by volume.
The hectic atmosphere and rapid growth of Alameda and FTX increased the pressure on those at the helm. The Wall Street Journal previously reported that the use of stimulants was common among people in the upper echelon of Bankman-Fried. Ellison tweeted last year, “Nothing like regular amphetamine use to make you realize how stupid a normal, non-drug human experience is.”
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 left the role. Trabucco said leading Alameda alongside Ellison had been “difficult, exhausting and all-consuming”, but added he would “stay on as an adviser”.
Cryptocurrency prices were near all-time highs in the fall of 2021, but by early 2022 digital currencies were plummeting and many investment and lending firms in the industry were facing financial pressures.
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By early November of this year, reports regarding the financial health of Alameda and FTX were piling up. Rival crypto exchange Binance scuttled a tentative plan to acquire FTX after due diligence revealed what Binance CEO Changpeng Zhao called a “chaotic” track record in an interview with Fox Business’ Susan Li.
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The interconnected relationship between the two companies ultimately led to their collapse, as FTX loaned billions of dollars of exchange client funds to Alameda in an effort to shore up the company’s finances. When pissed off investors went to withdraw funds from FTX, it was unable to meet these demands and went into insolvency.
During a video meeting earlier this month before the company and FTX filed for bankruptcy, The Wall Street Journal reported that Ellison told Alameda staff that FTX was using client funds to help Alameda to meet its debts, and added that she, Bankman-Fried and other members of the companies’ management were aware of the decision.
Fox Business’ Kayla Bailey and Aislinn Murphy contributed to this report.
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