Caroline Ellison, the former business and romantic partner of Sam “SBF” Bankman-Fried, the ex-CEO of FTX, provided crucial testimony during his trial on criminal charges.
As per court reports on October 10, Ellison admitted to engaging in fraudulent activities during her time at Alameda under Bankman-Fried’s leadership. She squarely attributed the mishandling of FTX user funds to SBF, claiming he established systems leading to Alameda appropriating about $14 billion from the exchange.
Ellison revealed, “Alameda took several billions of dollars from FTX customers and used it for investments… I sent balance sheets that made Alameda look less risky than it was.”
The initial connection between Ellison and Bankman-Fried developed during their time at Jane Street Capital, where SBF convinced her to join his cryptocurrency-focused ventures, leading to reports suggesting a significant decline in communication after FTX’s collapse in November 2022.
The nature of Ellison’s relationship with SBF is a central element in the allegations against the former CEO. Bankman-Fried faces fraud charges for directing Alameda to access FTX user funds without consent, using them for various purposes, including property acquisitions and political campaign contributions.
FTX co-founder and former Chief Technology Officer, Gary Wang, testified on October 5, claiming involvement in unlawful activities with Ellison and former Engineering Director Nishad Singh. SBF’s legal team seemed to shift responsibility for the exchange’s collapse onto Ellison during Wang’s cross-examination, contending she disregarded Bankman-Fried’s request to hedge Alameda investments.
An article on Gary’s testimony is available here.
Both Ellison and Wang pleaded guilty as part of an agreement with U.S. authorities, being among the first insiders from FTX and Alameda. It remains uncertain whether Bankman-Fried will testify as part of his defense strategy.
Today marked the conclusion of Wang’s testimony, discussing his plea agreement and other topics.
Ellison’s testimony revealed that from 2020 to 2022, $10 to $20 billion in FTX user funds ended up in Alameda. This money was used for loans, investments, and stablecoin conversions, with a lack of disclosure by FTX regarding Alameda’s line of credit.
The former Alameda Research CEO provided details about the firm’s repurchase of FTX Tokens (FTT) from Binance, directed by SBF through a line of credit. Ellison also expressed doubts about her qualifications for the role of Alameda’s CEO, stating, “Sam said I should do it; he was the person I reported to; he could fire me.”
She portrayed Bankman-Fried’s attitude toward risk, mentioning, “He [SBF] said it was okay if [there was] positive EV, expected value. He said he was willing to take large coin flips and talked about being willing to flip a coin and destroy the world, as long as a win would make it twice as good.”
According to her testimony, Ellison received an annual salary of $200,000 and a $20 million bonus in 2021.
The highlight of the day was Caroline’s statements about SBF’s ambition to become the President of the United States, following the conclusion of their romantic involvement, which continued in their leadership positions at Alameda Research and FTX until November 2022.
As of the reported information, Bankman-Fried’s legal team had not yet cross-examined Ellison. Their defense strategy seemed focused on shifting some responsibility for FTX’s downfall from SBF to Ellison, alleging she independently utilized the exchange’s funds at her discretion. Bankman-Fried has pleaded not guilty to all charges.
