After more than nine hours of testimony over two days, Carolyn Ellison, the most crucial witness in the government’s case against Sam Bankman-Fried, broke down as she described the final days of the cryptocurrency empire she helped build.
She said it was strange that even though it was “the worst week of my life overall,” she told Bankman-Fried at that moment that it was also “the best mood I’ve been in a year.” Through tears, she told jurors she felt an “overwhelming sense of relief” that the moment she had feared had finally come. She said she didn’t have to lie anymore, although she still felt “indescribably bad” for the people she had “betrayed.”
The moment she feared was the rapid financial collapse in November of Alameda Research, the cryptocurrency hedge fund of which she was CEO, and of FTX, its sister trading platform run by Bankman-Fried, 31, who she says guided her and her. . Others are to mislead the public and investors about the true nature of the relationship between the two companies.
Earlier in the day, Ellison described how she distributed “dishonest” balance sheets to lenders that concealed billions of dollars in funds withdrawn from FTX clients’ accounts.
Ellison said that before FTX’s collapse, it owed its customers $12 billion, but the company — contrary to Bankman-Fried’s assertions on Twitter — only had $4 billion in client holdings. The Alameda company seized the missing $8 billion to cover its debts and issue loans to Bankman Fried and others, according to prosecutors.
Bankman-Fried has pleaded not guilty to seven counts of fraud and conspiracy. His defense briefly began questioning Ellison on Wednesday before Judge Lewis Kaplan declared, “It’s been a long day,” and suggested adjourning court a half-hour early. Defense attorneys will continue questioning Ellison on Thursday.
Ellison, who dated Bankman-Fred for more than two years while working in Alameda, pleaded guilty to seven counts of fraud and conspiracy as part of a cooperation deal with prosecutors.
Over the course of two days, Ellison presented a version of events in which one person, Bankman Fried, ordered his inner circle to engage in criminal activity. Although she was Alameda’s CEO, Bankman-Fried supervised her and FTX, she testified.
Bankman-Fried could face 110 years in prison if convicted and given the maximum sentence.
The prosecution’s case depends on evidence proving this Bankman-Fried stole billions of dollars of FTX clients’ funds To cover Alameda’s losses and enrich himself and others. Prosecutors say that with funds transferred directly from FTX clients’ accounts, Bankman-Fried spent on luxury real estate and funneled millions of dollars in donations to U.S. political campaigns. By creating a secret facility that allowed Alameda to borrow from FTX, Bankman-Fried and other executives lied to investors and deceived customers who trusted they could withdraw their money at any time.
Ellison and other witnesses testified that Alameda, which engaged in high-risk cryptocurrency trading, had a secret and nearly unlimited line of credit with FTX that allowed it to profit from funds belonging to unwitting customers who deposited money on the exchange.
Plaintiffs’ evidence so far indicates that the creation of FTX in 2019 was motivated primarily by Bankman-Fried’s desire to obtain a significant source of capital beyond the third-party loans on which Alameda relied.
On Wednesday, Ellison also walked jurors through some previous personal to-do lists she kept in Google Docs, including one titled “Things That Concern Sam,” which she said she regularly updates to keep an eye on Bankman-Fried-related issues. Focused on.
Assistant U.S. Attorney Danielle Sasson questions Carolyn Ellison as defense attorney Mark Cohen stands to object at the Sam Bankman-Fried fraud trial in New York City on October 11, 2023, in this courtroom sketch.
Entries under that heading included “making regulators crack down on Binance” — a reference, she said, to what Bankman Fried believes are “the best possible ways to improve FTX’s market share” by luring clients from FTX’s biggest competitor. This was something, according to Ellison, that he claimed “organisers had been promising for a while, but it never happened.” (Binance, which is currently under intense regulatory scrutiny in the US, briefly emerged as a potential savior for FTX when its business was in free fall in November of 2022, but pulled out of the deal after Binance decided that FTX’s problems were “beyond our control.”) “Control or ability to assist.”)
The list also included “Buying SNAP,” which Ellison explained as Bankman-Fried’s plan to acquire Snapchat’s parent company.
The entry “Raise from Mohammed bin Salman” refers to Bankman Fried’s efforts to raise capital from Saudi Crown Prince Mohammed bin Salman.
In her testimony Wednesday afternoon, Ellison said Bankman-Fried’s disheveled appearance was a calculated public relations strategy.
“He thought his hair was very valuable,” she said, adding that Bankman-Fried believed he received higher rewards, going back to his early career as a Jane Street merchant, “because of his hair.”
Accused FTX founder Sam Bankman Fried leaves a US courthouse in New York City on July 26, 2023.
I thought he was trying to boost his image as an eccentric crypto pioneer.
Bankman-Fried often told reporters that he drove a Toyota Corolla, a detail that may indicate he is a down-to-earth person who doesn’t care about the trappings of being a billionaire. But Ellison said the Corolla was part of a media strategy, and he only started driving it after delivering his company-issued luxury car.
FTX collapsed into bankruptcy In November of 2022 after a leaked balance sheet revealing Alameda’s unusually close financial ties with FTX sparked panic among investors and customers.
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