SBF Trial: Sam Bankman-Fried Blames Caroline Ellison for FTX & Alameda's Collapse

In a document titled “Alameda’s Failure to Hedge,” Sam Bankman-Fried blames Caroline Ellison for the collapse of both Alameda & FTX, stating that “if Alameda had hedged properly then, neither it, nor FTX, would have blown out, […] but instead Caroline didn’t hedge until the summer of 2022.” I received this document in January 2023.

Summary

Alameda ended 2021 with roughly $100b of net asset value, and about $8b of net leverage–borrows coming from third party desks (Genesis etc.).  It was, in most respects, in great financial health.

If Alameda had hedged properly then, neither it, nor FTX, would have blown out.  In fact if it had hedged properly any time before the 3AC crash in mid 2022, it likely would have been fine even in the wake of the November 2022 crash and run on the bank triggered by Binance.

And I spent much of 2022 suggesting, with increasing urgency, that Alameda hedge.  But it didn’t.  I had left it a few years earlier, and Sam Trabucco–its co-CEO, who had been chiefly in charge of risk management–had begun leaving in 2021.  Running Alameda was an incredibly difficult job, and Caroline, the remaining CEO, wasn’t generally on top of hedging.  As markets crashed over the course of 2022, she continually avoided talking about risk management–dodging my suggestions–until it was too late.

If she had hedged appropriately, Alameda would have been about $7b better off by the time all was said and done–with nearly no remaining net borrowing.  That would have been enough for Alameda to have survived the November crash, even if it had unfolded exactly the same way, and thus enough for FTX and others to, as well.  It would have been a very different timeline.

But instead Caroline didn’t hedge until the summer of 2022.  And the remaining crash, which came in November 2022, was specifically targetted at Alameda’s assets–rather than being market driven.  Alameda’s hedges in the summer of 2022 ended up being too late.