Sam Bankman-Fried’s trial has taken a sudden turn as his former girlfriend and business partner Caroline Ellison testified against him in a New York court.
Ellison, the CEO of Alameda, who dated Bankman-Fried on and off for several years, pleaded guilty to multiple fraud and money laundering charges in December 2023. She agreed to cooperate with the government in exchange for a reduced sentence.
She told the jury that Bankman-Fried told her to do various crimes, including transfer funds from FTX customers to cover Alameda’s losses. Fake financial statements and trading records and lie to regulators and investors. She said:
“Alameda took several billions of dollars from FTX customers and used it for investments.” She continued. “He set up the systems and told us to take the money.”
She also shared details of their personal and professional relationship. She said they met at a trading firm, Jane Street, where they both worked as quantitative traders and shared a passion for effective altruism. That’s the movement that uses data and reason to maximize positive impact in the world.
She said Bankman-Fried left Jane Street in 2017 to start Alameda, a crypto hedge fund and invited her to be co-CEO. She said she accepted the offer despite having no experience in crypto because she wanted to “maximize my impact”.
In 2019 she said they moved to the Bahamas and started FTX, a crypto exchange that offered derivatives and leveraged trading. According to her FTX grew rapidly to become one of the world’s largest crypto exchanges with millions of customers and billions of dollars in deposits.
But she said FTX was having major financial problems behind the scenes. Alameda was losing money on its trades and using FTX customer funds to cover its losses. She said Bankman-Fried knew this and told her to keep it secret from the public and the authorities.
She said he also pressured her to manipulate the prices of specific cryptocurrencies on FTX. Bitcoin and Dogecoin. To benefit Alameda’s positions. She said he would communicate with her through encrypted apps like Signal and Telegram and use code words and nicknames to avoid detection.
She says their relationship deteriorated over time as she felt guilty and conflicted about their illegal activities. They broke up several times but always got back together because of their mutual dependence. She says she finally decided to end their relationship in October 2023 after finding out Bankman-Fried cheated on her with another woman.
Ellison says she also decided to cooperate with the government after being arrested in November 2023 when FTX collapsed during a run on deposits and a crash in crypto prices. She says she realized she made a huge mistake following Bankman-Fried’s orders and wanted to make it right.
She hopes her testimony will help the jury understand what happened at FTX and Alameda and hold Bankman-Fried accountable.
Bankman-Fried’s lawyer Mark Cohen cross-examined Ellison on Thursday and tried to discredit her and her motives. He asked her about her college education, salary, bonuses at Alameda, other crypto projects she was involved in and her personal life.
Sam Bankman-Fried also called his ex-girlfriend a liar and said she was cooperating with the government to get herself out of a long prison sentence. He said she was jealous of Bankman-Fried’s success and fame and was trying to frame him for crimes she committed or participated in.
Sam also pointed out inconsistencies and contradictions in her testimony. Like when she said FTX and Alameda didn’t have a proper “Chinese wall” which contradicts an email she sent to an FTX employee in 2022 saying otherwise.
He also asked her why she never confronted Bankman-Fried or reported him to the authorities if she knew what he was doing was wrong. Why she never felt remorse or regret for deceiving millions of FTX customers who trusted them with their money. Did she ever feel sorry for hurting anyone affected by their fraud?
Ellison defended herself against Cohen’s attacks and said she was telling the truth and had nothing to gain by lying. She said she was scared of Bankman-Fried and his influence in the crypto industry and felt trapped in a toxic relationship with him.
According to her she felt remorse and regret for what she did at FTX and Alameda. And pleaded for hurting anyone affected by their fraud. She said she hopes by cooperating with the government she can prevent similar crimes from happening again.He’s pleaded not guilty to 8 counts of fraud, money laundering and conspiracy. Jury is out for several more weeks. Up to 200 years in prison if convicted.
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