The trial of Sam Bankman-Fried, founder of the cryptocurrency exchange FTX and hedge fund Alameda Research, has taken a dramatic 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. Also agreed to cooperate with the government in exchange for a reduced sentence.
She told the jury that Bankman-Fried directed her to commit various crimes, including transferring funds from FTX customers to cover losses at Alameda. Falsifying financial statements and trading records, and lying to regulators and investors. According to her,
“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 revealed details of their personal and professional relationship. She described how they met at a trading firm, Jane Street, where they both worked as quantitative traders and shared a passion for effective altruism. This movement advocates for using data and reason to maximize positive impact in the world.
She said that Bankman-Fried left Jane Street in 2017 to start Alameda, a hedge fund specializing in cryptocurrency trading, and invited her to join him as co-CEO. She said that she accepted the offer despite having no experience in crypto because she wanted to “maximize my impact.”
In 2019, she mentioned that they relocated to the Bahamas and started FTX, a cryptocurrency exchange that provided derivatives and leveraged trading. According to her, FTX rapidly expanded to become one of the world’s largest crypto exchanges. With millions of customers and billions of dollars in deposits.
However, she said that FTX faced severe financial problems behind the scenes, as Alameda was losing money on its risky trades and using FTX customer funds to cover its losses. According said that Bankman-Fried knew this situation and instructed her to conceal it from the public and the authorities.
Ellison said that he also pressured her to manipulate the prices of specific cryptocurrencies on FTX. This includes Bitcoin and Dogecoin, to benefit Alameda’s positions. She said he often communicated with her through encrypted messaging apps like Signal and Telegram and used code words and nicknames to avoid detection.
According to her, their relationship deteriorated over time, as she felt guilty and conflicted about their illegal activities. She said they broke up several times but always got back together because of their mutual dependence. She said she finally decided to end their relationship in October 2023 after learning that Bankman-Fried cheated on her with another woman.
Ellison that she also decided to cooperate with the government after being arrested in November 2023. When FTX collapsed amid a run on deposits and a plunge in crypto prices.She said she realized she had made a massive mistake by following Bankman-Fried’s orders and wanted to make amends.
She hoped her testimony would help the jury understand the truth about what happened at FTX and Alameda and hold Bankman-Fried accountable for his actions.
Bankman-Fried’s lawyer, Mark Cohen, cross-examined Ellison on Thursday, trying to undermine her credibility and cast doubt on her motives. He questioned her about her academic background, salary, bonuses at Alameda, involvement in other crypto projects, and personal life.
Sam Bankman-Fried also accused his ex-girlfrined of lying to the court and cooperating with the government to save herself from a lengthy prison term. He suggested that she was jealous of Bankman-Fried’s success and fame. And was trying to frame him for crimes she committed or participated in willingly.
Sam also pointed out inconsistencies and contradictions in her testimony. Such as her claim that FTX and Alameda were not separated by a proper “Chinese wall,” which contradicted an email she sent to an FTX employee in 2022 stating otherwise.
He also challenged her assertion that Bankman-Fried directed her to commit fraud, asking her why she never confronted him or reported him to the authorities. If she knew what he was doing was wrong. He asked her if she ever felt remorse or regret for deceiving millions of FTX customers who trusted them with their money.
Ellison defended herself against Cohen’s attacks, saying 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. Also pleaded for hurting anyone affected by their fraud. She said that she hoped that by cooperating with the government, she could help prevent similar crimes from happening again.
The trial of Sam Bankman-Fried and her ex-girlfriend, who has pleaded not guilty to eight charges of fraud, money laundering, and conspiracy, is expected to last several more weeks. If convicted, he faces up to 200 years in prison.