Caroline Ellison persisted in her statement in the criminal court case versus Sam Bankman-Fried. Ellison declared that Bankman-Fried desired Alameda Research's financial statements to obscure the client money it had obtained from FTX. Furthermore, she maintained that she had a Google Doc with a subsection tagged "things Sam is freaking out about." One article specified was "raising from MBS," the Saudi crown prince.
Caroline Ellison, who managed Sam Bankman-Fried's crypto hedge fund while additionally dating the FTX founder, said to the jury on her second day of testimony that one possibility which Bankman-Fried was considering to make reparations to FTX customer accounts was to acquire funds from Saudi Crown Prince Mohammed bin Salman. She also noted Bankman-Fried's misgivings about his public image, like his opinion that his lengthy, untidy hair was “very valuable” with regard to constructing his narrative.Ellison, 28, pled guilty in December to a number of counts of fraud as a portion of an agreement with the government and is currently being perceived as the prosecution's chief witness in Bankman-Fried's trial. Giving a damning testimony on Tuesday, she said Bankman-Fried commanded her and other employees to defraud FTX customers by sending billions of dollars to sister hedge fund Alameda Research.Assistant U.S. attorney Danielle Sassoon immediately resumed her questioning when court opened on Wednesday.
On Wednesday, after detailing how FTX customer funds had been used to pay back Alameda loans, Ellison said that crypto lender Genesis had requested a balance sheet in 2022 and recalled numerous loans. She noted that a real balance sheet of Alameda's showed the company had $15 billion in FTX customer funds, prompting Bankman-Fried to direct her, on June 28, 2022, to come up with "alternative" balance sheets that wouldn't seem as bad. With her long hair tucked behind her, Ellison stated she discussed her worries with Bankman-Fried and executives Gary Wang and Nishad Singh, as they tried to brainstorm ways to make the balance sheet look better. Ellison then prepared a number of different balance sheet alternatives to present to Genesis. Ultimately, Ellison said Bankman-Fried selected one which omitted a line indicating "FTX borrows," which concealed $10 billion in loaned customer money. "Some was netted against related-party loans," she elaborated, "and some was netted against crypto."
Ellison told jurors she felt "a constant state of dread" as she was aware of the billions of dollars of loans that needed to be paid off with money from FTX customers, fearing what would happen if anyone found out. "I was worried about the possibility of customer withdrawals at any moment that could cause it all to come crashing down," she said. When asked why she continued with the scheme, Ellison mentioned that "Sam had told her to". By October 2022, the FTX internal balance sheet showed liabilities of $15.6 billion while the numbers they had provided to the lender indicated a sum just under $8 billion. According to Ellison, Bankman-Fried had mentioned trying to raise funds from Mohammed bin Salman, also known as MBS, as a way to make FTX customers whole; making it seem “like there were enough assets to cover the open term loans".
Ellison, a Stanford graduate, was recruited in 2017 by Bankman-Fried to join Alameda, a hedge fund in its original office in the San Francisco Bay area, as a trader, after leaving her job at Wall Street trading firm Jane Street. Six years later, Ellison is under oath testifying against Bankman-Fried, who faces seven federal charges such as wire fraud, securities fraud and money laundering, all related to FTX and Alameda's downfall in late 2020. Bankman-Fried has pleaded not guilty and could face a lifetime of imprisonment if convicted. Ellison mentioned that Bankman-Fried had instructed FTX and Alameda personnel to use the disappearing message setting on Signal and be cautious of what they communicated in writing due to the risk of legal repercussions. Along with the company-wide mandate on the Signal policy, Bankman-Fried also warned them that they should only discuss matters on Slack that they would be comfortable seeing on The New York Times' front page.
In the summer and fall of 2022, Ellison discussed two avenues to raise money for FTX with Bankman-Fried as his crypto firms' difficulties became more evident: a potential BlockFi takeover or the sale of equity. During August 2022, Bankman-Fried accused her of Alameda's financial issues, despite her notifications on FTX's growing venture investments and the need to reimburse FTX balance holders. He reprimanded her vigorously, saying it was her fault. On the stand, Ellison accepted some fault, claiming she should have acted differently, but specified it was Bankman-Fried who chose to make the investments that put them in a leveraged position. Ellison and Bankman-Fried had been dating since summer 2021, but by the fall of 2022, their romance had come to an end for several months. She tried to stay away from one-on-one conversation with him, but still communicated on Signal and were together with other people in meetings. She continued to give him reports on Alameda and its balance sheet.
Ellison reported that she kept a Google Doc, which had a section dubbed "things Sam is freaking out about," detailing the threat of implementation of MBS (the Saudi crown prince) and the crackdown of Binance, a rival exchange that had invested in FTX in its early stages. Bankman-Fried viewed the suffering of Binance as the most plausible way for FTX to gain more market share. There was also an apprehension of bad publicity for a six-month period, which Bankman-Fried was concerned would obstruct FTX's attempts to be granted a futures trading license in the U.S. Inquired about this matter further, Ellison stated that he had a "very proactive" approach, investing in publications such as Semafor and The Block (a crypto platform) and considering putting money into Vox and Forbes. He aimed to engineer his image as a brainy, peculiar entrepreneur, creating a perception of FTX as a secure, dependable, audited and closely regulated exchange that had the fascination of being an offshore business. Bankman-Fried employed Twitter as a "valuable" tool to manage the narrative regarding FTX. His personal look, particularly his hair, was important to him - he was described to have dressed slovenly in 2021 and believed his hair to be a "crucial" component of the narrative. He even replaced a decent company car with a Toyota Corolla as it was deemed "more fitting for his public image."
Ellison then addressed her own feelings during the time. She shared that she was on a trip in Japan when the business started crumbling in November. In Signal messages with Bankman-Fried that week, she informed him that she was in "the best mood [she'd] been in in like a year." Clearly emotional, Ellison divulged she experienced a range of emotions and "felt a sense of relief" in not having to "lie anymore." She revealed that with all of the transfer of FTX money, the company only had $4 billion to cover $12 billion in customer holdings.WATCH: Ellison declares 'Sam directed me to commit these crimes'
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