First they were colleagues in an operating room in New York. Then they were friends and ran a startup together in Hong Kong. They eventually became partners in a turbulent office romance that made tabloid headlines around the world.
On Tuesday, in a packed Manhattan courtroom, the relationship between Sam Bankman-Fried and Caroline Ellison took another turn. The two clashed for the first time since the cryptocurrency trading companies they built together, FTX and Alameda Research, collapsed in November.
Ellison, 28, took the stand on the fifth day of Bankman-Fried’s trial on conspiracy and fraud charges stemming from the implosion of FTX. He began by taking more than 10 seconds to identify Mr. Bankman-Fried when a prosecutor asked him to point him out.
Then, during about 15 minutes of initial testimony, Ellison repeatedly blamed Bankman-Fried, 31, for the crimes that led to FTX’s implosion. She testified that he directed her to withdraw funds from FTX clients to fund venture investments and loan repayments by Alameda Research, a crypto hedge fund she oversaw for him. She said Alameda took about $14 billion, of which only a portion was able to be repaid.
“He ordered me to commit these crimes,” Ellison said, as Bankman-Fried sat across the courtroom, flanked by his attorneys.
As the government’s star witness (and by far Bankman-Fried’s most discussed associate), Ellison is a key figure in the trial and her testimony was a highly anticipated moment.
She is considered the main accomplice of Mr. Bankman-Fried, who became a symbol of arrogance and dangerous risk-taking throughout the cryptocurrency industry after he was accused last year of masterminding a wide-ranging conspiracy to steal thousands of millions of dollars in deposits from FTX clients. Her romantic relationship with Mr. Bankman-Fried, whom she dated on and off, gave her exclusive access to the FTX founder as he built his crypto empire.
In December, Ellison pleaded guilty to fraud and conspiracy. He joined two other former FTX executives, Gary Wang and Nishad Singh, in agreeing to cooperate with prosecutors pursuing Bankman-Fried. A fourth former top executive, Ryan Salame, also pleaded guilty but is not cooperating with authorities.
Bankman-Fried has pleaded not guilty. He could receive what would amount to life in prison if he is convicted.
As the criminal investigation unfolded over the past year, Bankman-Fried made Ellison an important element of her defense. He has argued that she ignored his instructions and made mistakes in managing Alameda that contributed to FTX’s failure.
A few weeks before the trial, Bankman-Fried had his bail revoked and was sent to prison after a judge ruled that he had tried to intimidate Ellison by leaking his private writings to the New York Times.
In his testimony Tuesday, Ellison explained his history with Bankman-Fried. He also delved into the details of her relationship, often in very personal terms.
The couple met more than five years ago at the New York trading firm Jane Street, where Bankman-Fried worked after college. They bonded over a shared commitment to effective altruism, a popular philanthropic movement in tech circles, and eventually became romantically involved. They also dated for “a couple of years,” Ms. Ellison testified.
In 2018, she joined Bankman-Fried in Alameda, where she worked as a merchant and was later promoted to CEO.
Shortly after starting in Alameda, Ellison testified that he realized the company “was in a much worse situation” than Bankman-Fried had conveyed to him. The company had suffered heavy losses and was desperate for new sources of capital, he said.
He said Bankman-Fried was “very ambitious” and told him that he wanted his companies to succeed and that there was “a 5 percent chance” he would become president of the United States.
Ms. Ellison eventually moved with Mr. Bankman-Fried from Alameda’s original headquarters in the San Francisco Bay Area to Hong Kong, and then to the Bahamas, where FTX and Alameda were headquartered when they imploded.
Bankman-Fried and Ellison lived together in a luxurious penthouse on the Bahamian island of New Providence, along with eight other friends and executives, including Wang and Singh.
When prosecutors questioned Ellison about his relationship with Bankman-Fried, Ellison’s voice became softer. She described how she had little power in the relationship.
“He was the person I reported to,” he said of Bankman-Fried. “He owned the company, he set my compensation and he had the ability to fire me.”
Ellison said the dates “created some awkward situations” because Bankman-Fried was his boss. She said she finally broke up with him because she “often felt distant or didn’t pay attention to me.”
She recounted several times she questioned FTX’s use of client funds to pay lenders or make investments, but said Mr. Bankman-Fried assured her it was the right decision.
“As a trader, I was a customer of the exchanges and if I knew this was happening on another exchange I would feel uncomfortable leaving money there,” Ms Ellison said.
Ms. Ellison also testified that she was concerned about some of the ways FTX and Alameda treated FTT, the exchange’s digital currency created by Bankman-Fried. FTT was an important source of foreign currency for FTX and Alameda, as it was used as collateral to obtain loans and made FTX look like a more valuable company than it was.
When FTX collapsed, so did the price of FTT, leaving some of the exchange’s clients and Alameda’s lenders with huge losses.
Ellison said the FTT was included on Alameda’s balance sheet, a practice that artificially inflated the value of the trading fund, especially since the value of the FTT came largely from Alameda’s own operations in it. He added that he thought what he did was deceptive, but “Sam ordered me to do it.”
This is a developing story. Stay tuned for updates.
