The trial of Sam Bankman-Fried, the former CEO of the now-defunct crypto exchange FTX, resumed on October 10. The prosecution called Caroline Ellison, the ex-CEO of Alameda Research and Bankman-Fried’s ex-girlfriend, to testify against him.
Ellison’s testimony did significant damage to Bankman-Fried’s defense. She confirmed that she and the defendant had dated for a couple of years, starting in the summer of 2020. However, her affection for Bankman-Fried did not hinder her from testifying against him. As the prosecution’s star witness, she provided key insights into how Bankman-Fried allegedly misappropriated FTX’s customers’ funds through Alameda, which she had headed before its collapse.
During her testimony, Ellison admitted that she had committed fraud alongside Bankman-Fried and stated that he had directed her to do so. According to her, Alameda, and by extension, herself, took “several billions of dollars” from FTX customers and used the funds for investments. Ellison also confirmed that Bankman-Fried was the one who set up the systems and directed the trading firm to take the money. Additionally, Alameda took around $14 million to repay its lenders, and Ellison manipulated the firm’s balance sheets to make it look risky to potential lenders.
The prosecution used Ellison’s testimony to drive home major allegations against Bankman-Fried. They alleged that he diverted customers’ fiat deposits to a bank account linked to Alameda, which Ellison confirmed on the stand. According to her, FTX received money into Alameda’s bank accounts between 2021 and 2022, with a total sum deposited between $10-20 billion. Alameda used some of these deposits to repay loans, make investments, and convert stablecoins like USDC, amounting to approximately $2 billion. The remaining funds were used for other Alameda-related purposes.
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Bankman-Fried and his lawyers had previously tried to distance him from Alameda and claim that he was unaware of what was happening at the trading firm after stepping down as CEO. However, Ellison refuted this on the stand, stating that not much changed even when she became co-CEO alongside Sam Trabucco. She testified that she checked everything with Bankman-Fried and reported directly to him, highlighting his continued involvement and authority over Alameda.
One of the seven charges brought against Bankman-Fried is wire fraud on lenders to Alameda Research and conspiracy to commit wire fraud on lenders to Alameda Research. As someone with first-hand knowledge, Ellison’s testimony is critical in the prosecution’s attempt to prove these crimes beyond a reasonable doubt.
In conclusion, Ellison’s testimony during the trial of Sam Bankman-Fried has provided damaging evidence against him. She confirmed their relationship, admitted to fraud committed under his direction, and revealed how funds were allegedly misused at both FTX and Alameda. This testimony strengthens the prosecution’s case and could significantly impact the outcome of the trial.
