First they had been colleagues on a buying and selling flooring in New York. Then they had been mates operating a start-up collectively in Hong Kong. Ultimately they turned companions in a turbulent workplace romance chronicled in tabloid headlines around the globe.
On Tuesday, in a packed Manhattan courtroom, the connection between Sam Bankman-Fried and Caroline Ellison took one other flip. The 2 confronted one another for the primary time for the reason that cryptocurrency buying and selling corporations they constructed collectively, FTX and Alameda Analysis, collapsed in November.
Ms. Ellison, 28, took the stand for about 4 hours on the fifth day of Mr. Bankman-Fried’s fraud trial in federal court docket. . She started by taking greater than 10 seconds to determine Mr. Bankman-Fried when a prosecutor requested her to level him out.
Then throughout the first quarter-hour of her testimony, Ms. Ellison repeatedly blamed Mr. Bankman-Fried, 31, for crimes that led to FTX’s implosion. She testified that he instructed her to make use of FTX buyer deposits to finance enterprise investments and mortgage repayments by Alameda Analysis, a crypto hedge fund that she oversaw for him. She mentioned Alameda took round $14 billion, solely a few of which it was in a position to repay.
“He directed me to commit these crimes,” Ms. Ellison mentioned, as Mr. Bankman-Fried sat throughout the room flanked by his attorneys.
As the federal government’s star witness — and by far Mr. Bankman-Fried’s most generally mentioned affiliate — Ms. Ellison is a key determine within the trial, and her testimony was a extremely anticipated second.
She is thought to be a chief confederate to Mr. Bankman-Fried, who turned a logo of hubris and harmful danger taking throughout the cryptocurrency trade after he was charged final yr with masterminding a sweeping conspiracy to steal billions of {dollars} in deposits from FTX’s clients. Her romantic relationship with Mr. Bankman-Fried, whom she dated on and off, gave her distinctive entry to the FTX founder as he constructed his crypto empire.
In December, Ms. Ellison pleaded responsible to fraud and conspiracy. She joined two different former FTX executives — Gary Wang and Nishad Singh — in agreeing to cooperate with the prosecutors pursuing Mr. Bankman-Fried. A fourth former prime govt, Ryan Salame, additionally pleaded responsible however will not be cooperating with the authorities.
Mr. Bankman-Fried has pleaded not responsible. He might obtain what would quantity to a life sentence if convicted.
Because the legal investigation unfolded over the previous yr, Mr. Bankman-Fried turned Ms. Ellison into an necessary ingredient of his protection. He has argued that she ignored his directions and made errors in managing Alameda that contributed to FTX’s failure.
A number of weeks earlier than the trial, Mr. Bankman-Fried had his bail revoked and was despatched to jail after a decide dominated that he had tried to intimidate Ms. Ellison by leaking her personal writings to The New York Occasions.
In her testimony on Tuesday, Ms. Ellison defined her historical past with Mr. Bankman-Fried and delved into the small print of their relationship, typically in extremely private phrases.
Ms. Ellison and Mr. Bankman-Fried met greater than 5 years in the past at Jane Avenue, a New York buying and selling agency the place Mr. Bankman-Fried labored briefly after school. They bonded over a shared dedication to efficient altruism, a philanthropic motion well-liked in tech circles, and finally turned romantically concerned.
In 2018, Ms. Ellison joined Mr. Bankman-Fried at Alameda, the place she labored as a dealer and was then promoted to chief govt. That fall, she testified, they “began sleeping collectively on and off.”
Shortly after beginning at Alameda, Ms. Ellison mentioned, she realized the corporate “was in a lot worse form” than Mr. Bankman-Fried had conveyed to her. The agency had suffered giant losses and was determined for brand new sources of capital, she mentioned.
She mentioned Mr. Bankman-Fried was “very bold,” telling her that he needed his corporations to achieve success and that there was “a 5 % probability” that he would turn out to be president of america.
He had an uncommon method to danger, she added. At one level, she testified, Mr. Bankman-Fried mentioned he would fortunately carry out a coin flip if heads meant the world would turn out to be “twice pretty much as good,” even when tails meant the world could be destroyed.
Ms. Ellison finally moved with Mr. Bankman-Fried from Alameda’s unique headquarters within the San Francisco Bay Space to Hong Kong, after which later to the Bahamas, the place FTX and Alameda had been primarily based after they imploded.
Mr. Bankman-Fried and Ms. Ellison lived collectively in an expensive penthouse on the Bahamian island of New Windfall, together with eight different mates and executives, together with Mr. Wang and Mr. Singh.
When prosecutors questioned Ms. Ellison about her relationship with Mr. Bankman-Fried, Ms. Ellison’s voice turned softer. She mentioned that she had little energy within the relationship, and that Mr. Bankman-Fried didn’t need different folks to know they had been relationship.
“He was the individual I reported to,” she mentioned. “He owned the corporate, and he set my compensation and had the power to fireside me.”
Ms. Ellison mentioned relationship “created some awkward conditions” as a result of Mr. Bankman-Fried was her boss. She mentioned she finally broke up with him as a result of “he typically felt distant” or “wasn’t listening to me.”
Alameda had dipped into FTX’s buyer funds for years, Ms. Ellison mentioned. At a gathering in Hong Kong in 2021, she mentioned, Mr. Bankman-Fried approved the usage of FTX buyer deposits to purchase again about $2 billion in shares of the alternate that had been owned by the rival crypto firm Binance.
“We now have to get it completed,” she recalled him saying.
Ms. Ellison additionally recounted a number of occasions that she questioned the usage of FTX buyer funds to pay lenders or make investments, just for Mr. Bankman-Fried to reassure her that it was the suitable transfer.
“As a dealer, I used to be a buyer on exchanges and if I knew this was taking place at one other alternate I might be uncomfortable leaving cash there,” she mentioned.
Prosecutors walked Ms. Ellison by means of a number of spreadsheets she had ready and shared with Mr. Bankman-Fried, wherein she predicted Alameda would wrestle to pay again its lenders if the market crashed.
Ms. Ellison additionally testified that she was troubled with a number of the methods FTX and Alameda handled FTT, a digital coin that was created by Mr. Bankman-Fried.
Mr. Bankman-Fried was intent on guaranteeing that FTT maintained a sure worth in the marketplace, Ms. Ellison testified. That was due to its position in Alameda’s enterprise, she mentioned. The hedge fund supplied FTT as collateral for loans, basically permitting the agency to alternate an invented forex for different belongings. To cease FTT’s worth from falling, Mr. Bankman-Fried directed Alameda to purchase giant portions periodically, Ms. Ellison mentioned.
Mr. Bankman-Fried needed to maintain these efforts secret, Ms. Ellison mentioned, and scolded her when she mentioned Alameda’s FTT technique brazenly within the workplace.
Ms. Ellison mentioned she was uncomfortable utilizing FTT to acquire loans as a result of its worth was largely imaginary — if it had been bought in giant portions, it might shortly turn out to be nugatory.
However, she defined, “Sam directed me to do it.”
Ms. Ellison is ready to take the stand once more on Wednesday.
The contents throughout the article have been equipped through Newswire for Finencial.com, go to