Alameda Research's Caroline Ellison enlists former SEC head as legal counsel in FTX case

Caroline Ellison, the former CEO of Alameda Research, has hired Stephanie Avakian as her attorney. Avakian was the former head of the Securities and Financial Services department at law firm WilmerHale and a former regulator at the US Securities and Exchange Commission (SEC).

Alameda Research is the trading firm of the now-defunct FTX crypto exchange, which is currently facing investigations by Congress, regulators, and its own bankruptcy team over allegations that Alameda traded billions of dollars in consumer assets deposited at the exchange. Prosecutors from the US attorney's office and the California Department of Financial Protection and Innovation are also investigating whether SBF, the exchange's CEO and founder, was responsible for the Terra ecosystem's demise.

The New York Times reported that the majority of TerraUSD Classic "sell" orders originated from Alameda Research. Ellison is expected to be grilled by federal prosecutors over the crash of FTX.

Avakian was the chief of the Enforcement Division at the SEC, where she increased cryptocurrency compliance by bringing actions against Ripple Lab and Robinhood. Avakian's oversight also encompassed challenges such as financial fraud, insider trading, audit and accounting irregularities, market structure, and asset management anomalies.

Before FTX's bankruptcy filing in November, Alameda borrowed $3.3 billion from the exchange and gave it to SBF and firms he oversaw to cover losses and make reckless bets. Binance, a competitor exchange, explored purchasing a share of FTX, but swiftly changed its mind. On November 11, Bankman-Fried resigned and FTX filed for bankruptcy protection.

Ellison has remained silent and generally unavailable throughout the company's disintegration. Some have speculated that Ellison may be helping with law enforcement. Bloomberg also reported that SBF has openly laid blame on Alameda in many interviews, while Ellison has remained silent.

It is unclear what the outcome of these investigations will be, but the hiring of Avakian signals that Ellison is taking the allegations against her and Alameda Research seriously. As a former regulator at the SEC, Avakian is well-equipped to navigate the complex legal landscape surrounding the allegations against Alameda and the crash of FTX. It remains to be seen how the situation will develop, but it is likely that there will be more updates in the coming weeks and months.