Sam Bankman-Fried trial: ex-girlfriend says he directed her to commit crimes

On the fifth day of Sam Bankman-Fried’s fraud trial, the prosecution brought its star witness to the stand.

Caroline Ellison is the former paramour and business partner of the FTX founder, at times dating the 31-year-old and also serving as CEO of Alameda Research, the hedge fund closely associated with the failed cryptocurrency exchange. She resided with Bankman-Fried and other FTX executives in a massive Bahamas mansion where they all lived, worked, and managed the company. Ellison took the stand on Tuesday to give her account of Bankman-Fried’s alleged crimes, which prosecutors have described as one of the largest financial frauds in US history.

During Ellison’s testimony, the prosecutor Danielle Sassoon questioned the former Alameda CEO over her relationship with Bankman-Fried and how their actions led to the collapse of FTX. Ellison’s testimony blamed Bankman-Fried for financial crimes at the company, alleging that he had directed her to commit fraud and conspiracy.

“While you were working at Alameda, did you commit any crimes?” the prosecutor asked Ellison.

“Yes, we did,” Ellison said. “[Bankman-Fried] directed me to commit these crimes.”

Ellison arrived in court just after 12.30pm wearing a salmon-covered dress, glasses, and a slate grey blazer.

Sassoon asked, at a general level, how Bankman-Fried was able to commit the alleged fraud. Ellison said: “He was the one who set up these systems that allowed Alameda to take the money” and the one to oversee it. Prosecutors have accused FTX of playing fast and loose with its customers’ cash.

A bit later, Sassoon asked: “Around how much FTX customer money did Alameda use to repay its lenders?”

“Uh, in the ballpark of $10bn,” Ellison replied.

Ellison cut a deal with federal prosecutors in late 2022, pleading guilty to wire fraud and multiple financial conspiracy charges. Federal lawyers implied in the trial’s opening statements that her cooperation with them has been extensive. Ellison said in plea proceedings that she had “agreed with Mr Bankman-Fried and others to provide materially misleading financial statements to Alameda’s lenders”.

Prosecutors allege Bankman-Fried and those in his inner circle used money from FTX customers for Alameda’s investments and trades, which led to an $8bn shortfall at FTX after the value of nearly all cryptocurrencies plummeted in 2022. The exchange eventually filed for bankruptcy.

Bankman-Fried’s defense appears likely to paint Ellison as a scorned lover and an incompetent businesswoman. His attorneys have questioned witnesses about a request from the entrepreneur for Alameda to place a hedge to protect against a market downturn that she did not follow. The Bankman-Fried himself has leaked documents about her to the press. ​​Judge Lewis Kaplan revoked the FTX founder’s bail and sent him to prison after entries from Ellison’s journal were published in the New York Times, finding probable cause for allegations of witness tampering.

The day began with testimony from Gary Wang, an FTX co-founder who first took the witness stand last week and has pleaded guilty to wire, securities and commodities fraud. Wang testified that Bankman-Fried was not surprised to find that FTX faced enormous financial shortfalls when the exchange’s collapse began in 2022. Bankman-Fried faces seven counts of fraud and conspiracy charges in the trial. He has pleaded not guilty.

In Wang’s cross-examination, defense attorney Christian Everdell posited that Alameda’s financial situation and its operations were not as dire as prosecutors had presented. Everdell stated that Alameda used only a fraction of its massive line of credit with FTX. He also questioned Wang on the company’s own crypto coin, FTT, which prosecutors have alleged Bankman-Fried used to cover up Alameda and FTX’s financial failings. As the cross-examination continued, Everdell pressed Wang on the decisions Ellison made as Alameda’s CEO, asking about whether she had insulated the fund from market shocks.

Bankman-Fried’s defense attorneys have attempted to cast him as a simple, wayward boy genius who never intended to hurt anyone. One of his lawyers called him “a math nerd who didn’t drink or party.”. The prosecution, by contrast, has depicted Bankman-Fried as a greedy svengali who manipulated his business associates for his own financial gain –— and $10bn in fraud.

Adam Yedidia, an FTX developer who was close to Bankman-Fried, testified last week: “Sometime in early 2019, the defendant told me that he and Caroline had had sex and asked if it was a good idea for them to date.”

When a prosecutor asked what he thought of the arrangement, Yedidia said:, “I said no.”