Ellison’s Closing Testimony — FTX Was ‘a Bad Idea’

The biblical hero Samson and modern anti-hero Sam Bankman-Fried have more in common than expected.  

For one, they both considered their hair to be key to their superpowers — and two, they were both ultimately betrayed by their lovers.

Federal criminal and former crypto trading firm CEO Caroline Ellison wrapped up her final day of witness testimony in the trial of her on-again-off-again boyfriend and boss Bankman-Fried on Thursday (Oct. 12), painting a damning picture of the latter’s time running the failed crypto exchange FTX.

A business which she told the court under cross-examination that she considered “a bad idea” at the time.

Still, FTX reached a peak valuation of over $30 billion and made Bankman-Fried a paper billionaire before the whole facade came crashing down as a result of the seven counts of alleged criminal fraud he stands accused of.

Bankman-Fried has pleaded not guilty, and he faces the equivalent of a life sentence if convicted.

And he couldn’t help but laugh at times as his ex-girlfriend testified against him. Ellison has already pleaded guilty to four criminal counts for her role in the loss of billions of dollars of allegedly stolen funds and is cooperating with government prosecutors in hope of a lighter sentence.

“Your Honor, given where I’m standing, I’ve noticed several times since the lunch break that in response to things the witness has said, the defendant has laughed, visibly shaken his head, and scoffed,” the prosecution told the judge, who replied that he “hadn’t been looking.”

Referring to Bankman-Fried’s decisions while at the helm of FTX, Ellison said, “I think they were terrible mistakes.”

Read also: From Star-Crossed Lovers to Star Witness: Caroline Ellison Says Bankman-Fried Called All the Shots

A Friendly Affair

Bankman-Fried was arrested last December, and has spent the nearly a year since seeking to shift the blame for his crypto empire’s rapid collapse on everyone but himself, including FTX’s legal team, Alameda Research’s CEO Ellison, and others.

Now, many of those same insiders are testifying against him on the side of the prosecution — and they are unequivocally saying it was all his doing.

“He directed me to commit these crimes with Gary Wang and Nishad Singh,” Ellison told the jury on her first day of testimony Tuesday (Oct. 10).

“The main reason [FTX collapsed] was Alameda borrowing $10 billion from FTX it couldn’t repay,” Ellison said Thursday, referencing the billions of dollars in FTX deposits that Bankman-Fried is alleged to have illegally misappropriated and spent on real estate, venture investments, and insider loans.

In June 2022, as crypto prices plummeted and Alameda’s lenders called in their loans, the firm was “forced” to use cash from FTX to repay them.

When Ellison, who was running Alameda at the time, was asked by the defense whether she considered “having third party lenders to be an appropriate structure,” she replied that it “had advantages over being a hedge fund and having investors.”

Still, she did express concerns about the structure, which she referred to as being a “trading firm.”

“What was the basis of your concern at the structure?” the defense asked.

“That Alameda was taking and putting FTX customers’ funds at risk,” Ellison replied.

Read also: Sam Bankman-Fried, FTX and the Demise of the Cool Kids

Bad at Their Jobs

A small victory for Bankman-Fried’s defense came when Ellison told prosecutors that it “seemed like [Sam] might not know” about FTX customers continuing to wire money to Alameda bank accounts, even after the exchange got its own account.

Ellison also admitted that she wasn’t “as good a manager or leader” as she “could be and wasn’t pushing employees to, you know, make new things or do better in the way that I wished we were.”

She told the court that her inexperience, as well as that of former Alameda CEO Sam Trabucco, contributed to Alameda’s problems.

“Sam thought Alameda should have hedged way more earlier in the year and that it was a big mistake and that it was my fault and that I was largely responsible for the financial situation that Alameda had ended up in,” Ellison said.

The next witness to take the stand after Ellison was Christian Drappi, a software engineer who worked at Alameda.

Before the hearing adjourned for the day, Drappi confirmed to the jury that “Mr. Bankman-Fried had access” to Alameda’s inner workings.