Caroline Ellison Takes the Stand Against Bankman-Fried
- Ellison claims Bankman-Fried oversaw the illegal activities between FTX and Alameda Research.
- Ellison confessed to wanting more from her relationship with her former boss but felt he was distant and often ignored her.
- The defense team is likely to paint Ellison as an aggrieved lover seeking to do some damage.
Sam Bankman-Fried’s criminal trial reached a new high on Tuesday following the anticipated arrival of the prosecution’s star witness, Caroline Ellison. Ellison served as the former head of Bankman-Fried’s hedge fund, Alameda Research, and was also his on-and-off girlfriend.
Ellison entered a guilty plea to fraud in December and was touted as the prosecution’s biggest weapon against Bankman-Fried.
Ellison acknowledged committing fraud while working for Bankman-Fried at Alameda, saying he “set up the systems” that allowed the hedge fund to siphon off almost $14 billion from FTX. She listed her crimes as “fraud, conspiracy to commit fraud, and money laundering.”
She told the court:
Sam directed me to commit these crimes. He directed us to take customer money to pay loans.
In addition, Ellison claims that between 2020 and 2022, FTX deposited $10–20 billion in user funds to Alameda, some of which were used to “repay loans, investments, and stablecoin conversions.” Ellison further stated that FTX failed to inform both investors and auditors of Alameda’s line of credit.
Ellison remarked in her testimony:
We ultimately took around $14 billion, some of which we were able to pay back. I sent balance sheets to lenders at the direction of Sam that incorrectly stated Alameda’s assets and liabilities.
Ellison, wearing glasses and a loose gray jacket over a red dress, was questioned about her relationship with Bankman-Fried. She gave a quick history of how she first met Bankman-Fried. The former Alameda Research head said they first became acquainted while she was an intern at the New York proprietary trading firm Jane Street.
She claimed that although they had occasionally shared a bed in 2018, not long after she started working at Alameda, their relationship officially began in 2021. Ellison described their romance as tumultuous, and the couple broke up in 2022. However, they maintained a professional relationship. She confessed to wanting more from their relationship but felt Bankman-Fried was too distant and ignored her.
Ellison noted that Alameda was in worse condition than she first thought when she joined the firm. The company experienced significant losses, lenders quit, and several staff members resigned.
In reference to the comingling of funds, Ellison stated that Bankman-Fried oversaw the practice of channeling money from FTX to Alameda.
In 2021, FTX repurchased the company’s equity from Binance, its rival. However, Ellison noted that FTX used $1 billion in client funds for the purchase. These shocking revelations will no doubt pile the pressure on the FTX founder.
Bankman-Fried’s legal team has tried to portray him as a straightforward, innocent young genius who never meant to harm anyone. One of the defense lawyers said the 31-year-old was a “math nerd who didn’t drink or party.” But the prosecutors think differently about Bankman-Fried. They believe the former billionaire is a greedy businessman who used his customers’ funds for his personal gain.
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