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

Right out of the gate, Caroline Ellison admitted to stealing billions of dollars.

Of course, she has already pleaded guilty to four criminal counts related to doing just that. The maximum total sentence carried by her crimes is 110 years. She is hoping for far less.

On Tuesday (Oct. 10) the former CEO of Alameda Research’s made her first public appearance since the implosion of the FTX cryptocurrency exchange and its over 100 affiliate companies — and she spent it taking the witness stand in the fifth day of the criminal trial of her former boss and on-again-off-again lover, the 31-year-old crypto entrepreneur Sam Bankman-Fried.

Ellison, who is cooperating with the U.S. government in its case against Bankman-Fried, wore a muted red dress and arrived in court wearing a blue hat, sunglasses, and clutching a travel coffee mug.

She had just 10 minutes to speak before the court broke for lunch.

Pointing to the disgraced FTX co-founder, Ellison said, “He was the head of Alameda, then FTX. He directed me to commit these crimes with Gary Wang and Nishad Singh.”

Asked by the prosecution what made her guilty, Ellison replied that “Alameda took several billions of dollars from FTX customers and used it for investments.”

The government’s star witness added that Bankman-Fried “set up the systems and told us to take the money.”

When pressed on just how much money was taken, Ellison replied that the amount was “in the ballpark of $10 billion, ultimately around $14 billion … some of which we were able to pay back.”

She told the jury that she defrauded Alameda’s lenders by sending fraudulently doctored balance sheets that made the trading firm she ran “look less risky than it was.”

When Alameda had to pay back its lenders, it used the customer funds allegedly stolen from FTX. Later, when FTX couldn’t pay back its own customers in November 2022 because billions of its assets had been misappropriated and funneled to Alameda, the gig was up.

Gary Wang, FTX’s former CTO and another cooperating government witness, took the stand Tuesday morning before Ellison and told the jury that the collapsed cryptocurrency exchange was seeing withdrawals of up to “$100 million an hour” on Nov. 6 when cracks first began to show in the company’s digital asset empire.

Read also: Gary Wang Details FTX’s 3-Year Journey From Trusted to Busted

Ellison Adamant Bankman-Fried Orchestrated Fraud

Ellison, who is 28, worked with Bankman-Fried at high-frequency trading fund Jane Street before joining him at Alameda, where she was later named co-CEO in 2021, two years after Bankman-Fried founded the crypto exchange FTX.

She is the third member of Bankman-Fried’s inner circle to have turned coat and cooperated with federal prosecutors in the hope of receiving a more lenient sentence. Ellison is considered to be one of the government’s star witnesses due to her entangled personal and professional relationships with the former FTX CEO.

Bankman-Fried had his bail revoked after he leaked her personal writings to a New York Times reporter, which the prosecution alleged to be a form of witness intimidation.

The jailed FTX co-founder has publicly stated multiple times that Alameda and FTX were entirely separate and that he did not have much, if anything, to do at all with the trading firm’s management. Ellison’s testimony disabuses this notion and paints a picture of intimate — and disastrous — comingling.

Prior to their crypto empire’s collapse, both Ellison and Bankman-Fried made several statements to the fact that FTX and Alameda were separate and that the latter enjoyed no special privileges on FTX. That was far from the truth, Ellison testified, with Alameda enjoying many such privileges.

While Alameda enjoyed a $65 billion line of credit from FTX, Ellison told the jury that the firm only needed “around $100 million to $200 million.”

She told the court that she was not aware when, or if, Alameda would have to return the money it borrowed from the FTX.

Ultimately, the crucial question would end up being “how.”

Ellison admitted to prosecutors she had calculated a 30% chance that Alameda would not be able to repay its loans, no matter how much money it took from FTX.

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

Aware of Taking FTX Customer Money

Ellison told the jury that Bankman-Fried was fully aware Alameda was taking money from FTX’s customers, and cited his massive appetite for risk.

Bankman-Fried maintains his innocence. He is facing seven counts of fraud and money laundering.

When asked by the prosecution what Bankman-Fried had told Ellison about his ambitions while they were dating, Ellison replied that Bankman-Fried told her there was a 5% chance he would one day become president of the United States.

There are no restrictions in the U.S. banning convicted felons from running for the nation’s highest office.

The prosecution told the judge that Ellison’s testimony would take up most of tomorrow’s hearing, and that they plan to rest their case in a little more than two weeks — around Oct. 26 or 27.

Bankman-Fried’s defense team told the judge that they may take a week, or a week and a half, to present their side of things. So far, they have attempted to present the failings of their client’s business as typical business practices and attributable to the growing pains of a multibillion-dollar tech startup.