December 7, 2023

First they had been colleagues on a buying and selling ground in New York. Then they had been associates working a start-up collectively in Hong Kong. Finally they grew to become 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 firms 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 establish 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 Research, a crypto hedge fund that she oversaw for him. She mentioned Alameda took round $14 billion, solely a few of which it was capable of 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 considered a chief confederate to Mr. Bankman-Fried, who grew to become a logo of hubris and harmful threat taking throughout the cryptocurrency business after he was charged final 12 months with masterminding a sweeping conspiracy to steal billions of {dollars} in deposits from FTX’s prospects. 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 guilty 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 high govt, Ryan Salame, additionally pleaded responsible however will not be cooperating with the authorities.

Mr. Bankman-Fried has pleaded not responsible. He may obtain what would quantity to a life sentence if convicted.

Because the prison investigation unfolded over the previous 12 months, Mr. Bankman-Fried turned Ms. Ellison into an necessary aspect of his protection. He has argued that she ignored his directions and made errors in managing Alameda that contributed to FTX’s failure.

A couple of weeks earlier than the trial, Mr. Bankman-Fried had his bail revoked and was sent to jail after a decide dominated that he had tried to intimidate Ms. Ellison by leaking her private 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, usually in extremely private phrases.

Ms. Ellison and Mr. Bankman-Fried met greater than 5 years in the past at Jane Road, a New York buying and selling agency the place Mr. Bankman-Fried labored briefly after school. They bonded over a shared dedication to effective altruism, a philanthropic motion fashionable in tech circles, and finally grew to become 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 massive losses and was determined for brand new sources of capital, she mentioned.

She mentioned Mr. Bankman-Fried was “very formidable,” telling her that he needed his firms to achieve success and that there was “a 5 % probability” that he would develop into president of america.

He had an uncommon method to threat, 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 develop into “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 based mostly after they imploded.

Mr. Bankman-Fried and Ms. Ellison lived collectively in an opulent penthouse on the Bahamian island of New Windfall, together with eight different associates 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 grew to become softer. She mentioned that she had little energy within the relationship, and that Mr. Bankman-Fried didn’t need different individuals 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 fireplace 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 usually 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 using FTX buyer deposits to purchase again about $2 billion in shares of the trade 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 using FTX buyer funds to pay lenders or make investments, just for Mr. Bankman-Fried to reassure her that it was the proper transfer.

“As a dealer, I used to be a buyer on exchanges and if I knew this was occurring at one other trade I’d 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, through which she predicted Alameda would battle 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 making certain that FTT maintained a sure worth available on the market, Ms. Ellison testified. That was due to its function in Alameda’s enterprise, she mentioned. The hedge fund provided FTT as collateral for loans, primarily permitting the agency to trade an invented forex for different property. To cease FTT’s worth from falling, Mr. Bankman-Fried directed Alameda to purchase massive 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 massive portions, it may shortly develop into nugatory.

However, she defined, “Sam directed me to do it.”

Ms. Ellison is about to take the stand once more on Wednesday.

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