Sam Bankman-Fried has been absorbing most of the flack throughout the FTX meltdown and for good reason. He’s the face of the company, the core decision maker and he’s doing almost all of the public-facing talking about the downfall in recent days. However, there are more characters to this news and they’re making their own moves behind the scenes. Specifically, Alameda Research CEO Caroline Ellison is sparking up rumors, potentially having been spotted in New York City.
Alameda Research is another Sam Bankman-Fried-founded company. It’s also closely linked to the FTX collapse. FTX was supplying the private equity company with FTX Token (FTT-USD), which it used to collateralize loans and stake for profit. In fact, Alameda held a massive amount of FTT on its balance sheet — about $6 billion worth.
The company kept much of the FTT staked, putting it in an illiquid state. So, as this information became public and whales like Binance (BNB-USD) began to sell their FTT, Alameda could not provide the large amount of liquidity needed to prevent a price plunge. When FTX saw the bank run on FTT, Alameda Research had desperately offered a lengthy portfolio of illiquid investments to creditors in an attempt to secure a credit line bailout.
The involvement of Alameda through all of this is crucial to the FTX story. Sure, Bankman-Fried is the founder of the company. But he was not a leader of Alameda in any capacity. There was an entire other executive team presumably colluding with FTX to use customer funds. These people are just as responsible as Bankman-Fried. And rumors suggest someone near the top of this pyramid is looking for a quick and clean way out.
Could Alameda Research CEO Caroline Ellison Be Seeking a Plea Deal?
Caroline Ellison is the CEO of Alameda Research and a close partner to Sam Bankman-Fried. Ellison has also largely avoided most of the scrutiny fired at FTX. Aside from the odd deep dive into Ellison’s hobbies and interests, there isn’t even a whole lot about her online. But she might soon be known for blowing the lid off of the FTX story, if rumors hold true.
Throughout FTX’s collapse, Ellison was located in Hong Kong, the headquarters of the now defunct Alameda Research. However, over the weekend, a citizen journalist allegedly spotted Ellison at a coffee shop in New York City.
Ellison’s travels halfway around the world have allowed the rumor mill to run wild. Before she was spotted, suspicion floated around that Ellison, Bankman-Fried and other executives at the companies were bound for the United Arab Emirates (UAE). Never did anybody anticipate these disgraced executives to head for the U.S. on their own accord.
This news has allowed theories to abound about why Ellison would want to go into the regulatory belly of the beast — especially as Congress turns its microscope onto the companies. Some believe that Ellison is in the country to meet with regulators and spill details on how much Bankman-Fried knew about the convoluted financial situation prior to the collapse. This theory is fueled heavily by Bankman-Fried’s recent interviews, in which he lays blame on Ellison and other close partners.
Is Ellison getting ahead of the criminal charges sure to find Sam Bankman-Fried’s circle? There’s an obvious incentive for her to do so. Lawmakers will likely sympathize more with the person who explains themself right away than the person trying to delay their own testimony.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.