The Billion-Dollar Alameda Lender Fraudby@legalpdf
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The Billion-Dollar Alameda Lender Fraud

by Legal PDFMarch 19th, 2024
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Discover the fraudulent schemes where Bankman-Fried misled Alameda's lenders, resulting in losses exceeding a billion dollars and causing financial crises for several institutions. Bankman-Fried orchestrated a billion-dollar fraud by deceiving Alameda's lenders through falsified balance sheets and misleading information, leading to financial crises for several institutions and substantial losses. The court proceedings unveil the extent of the lender fraud and its impact on the financial landscape.
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USA v. Samuel Bankman-Fried Court Filing, retrieved on March 15, 2024 is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 5 of 33.

C. Fraud on Alameda’s Lenders

In a third scheme to obtain money illegally, the defendant defrauded lenders to Alameda. The losses from this fraud also exceeded a billion dollars.

As explained above, Alameda financed its trading operation principally through large, open-term loans from third-party lenders, like Genesis, BlockFi, Voyager, Ledn, BitGo, and others. In May and June 2022, those lenders recalled nearly all of their loans, which Alameda repaid using customer funds. (Tr. 645, 753-54). After that point, in order to obtain new loans from these third-party lenders, the lenders requested that Alameda provide an updated balance sheet. After receiving these requests, Ellison sent Bankman-Fried a draft balance sheet and said, “I think it looks bad, I don’t think we can send this to Genesis, do you agree?” (Tr. 785). And he said, “Yeah, that sounds right.” (Id.).

The reason Bankman-Fried and Ellison believed they could not send the real balance sheet to lenders was because it showed that Alameda was borrowing around $10 billion from FTX and had made about $5 billion in related-party loans to FTX executives like Bankman-Fried, Wang, and Singh. (GX-44). Then Bankman-Fried told Ellison to “prepare some alternative ways of presenting the information and send them to him.” (Tr. 786). Ellison prepared seven alternatives to the real balance sheet, which omitted or hid Alameda’s borrowing from FTX and the large loans to FTX executives. (GX-44). Bankman-Fried told Ellison “we should use alternative 7” (Tr. 795), referring to one of the tabs of a spreadsheet she shared with him, and she sent that to Genesis and other lenders. (GX-17, GX-419). The spreadsheet was misleading in several ways: among other things, it concealed that Alameda was borrowing billions of dollars from FTX and that these loans were callable at any time; it overstated Alameda’s assets and understated its liabilities; and it concealed the billions of dollars of related-party loans made by Alameda to FTX insiders, like Bankman-Fried

After receiving the fraudulent balance sheet, Alameda’s lenders extended new loans. (GX1014). Had the lenders know about the undisclosed borrowing from FTX’s customers, and the true state of the balance sheet, they would not have lent Alameda money. (Tr. 1217-24). But because of the defendant’s fraud, a number of lenders had large loans to Alameda outstanding at the time of its bankruptcy. Alameda’s defaults on those loans threw several lenders into financial crisis and, in the case of BlockFi, caused the firm’s bankruptcy just a few weeks after FTX’s bankruptcy. (Tr. 1228).

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This court case retrieved on March 15, 2024, from storage.courtlistener is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction.