In a tense New York courtroom, Caroline Ellison, a former tech executive of Sam Bankman-Fried’s hedge fund, delivered a damning testimony on Tuesday, accusing her ex-boss of orchestrating a series of financial crimes leading up to the downfall of his cryptocurrency empire last November. Ellison also revealed that Bankman-Fried held an unrelenting ambition, fueled by visions of presiding over immense entities, wielding his wealth in political spheres, and even dreaming of a chance at the U.S. presidency.
Bankman-Fried, 31, whose personal wealth was once estimated at $32 billion, attentively followed Ellison’s narrative from his courtroom seat. He faces charges of fraud, conspiracy to commit fraud, and money laundering. Ellison stated she was intimately involved in these criminal activities, having been directly ordered by Bankman-Fried to swindle customers, investors, and lenders affiliated with FTX, Bankman-Fried’s creation, and Alameda Research, his hedge fund establishment.
Within the corporate framework that Bankman-Fried dominated, his influence was such that Bitcoin units he generated were sometimes christened “Sam’s coins”, denoting his control over the financial manoeuvres. After his enterprises fell apart and clients rushed to withdraw their investments, bankruptcy unavoidably ensued. Prosecutors aver that misappropriated funds were utilized in his businesses’ operations, substantial donations, and political contributions, potentially an attempt to sway cryptocurrency regulatory norms in Washington.
Testifying under a cooperation agreement, Ellison, 28, could be granted leniency upon sentencing. Her testimony could crucially impact the jury’s determination of Bankman-Fried’s culpability for the seven counts he stands accused of. Since August, Bankman-Fried has been incarcerated, with Judge Lewis A. Kaplan ruling that he was untrustworthy due to attempts to influence Ellison and other potential trial witnesses.
Ellison, a math-whizz and Stanford alumnus, first encountered Bankman-Fried during her tenure at investment conglomerate Jane Street. She quickly moved on to join his team following the formation of Alameda Research in 2017. Initially unaware of the company’s dire situation, Ellison soon discovered the extent of the financial chaos and widespread staff exodus crippling the company.
Ellison’s testimony casually broached the subject of her romantic relationship with Bankman-Fried. They initiated a secretive relationship starting from fall 2018, which was temporarily terminated in summer 2021, only to resume briefly in fall 2021.
Bankman-Fried appointed Ellison as Alameda’s CEO and was compensated with a salary of $200,000 and an exorbitant bonus of $20 million in 2021. She testified that Bankman-Fried established systems that facilitated Alameda’s unregulated withdrawals from FTX accounts. Funds then siphoned off from FTX totaled up to $14 billion, with some amounting to political contributions, allegedly used to gain influence and recognition.
Gary Wang, FTX co-founder and a notable figure from Bankman-Fried’s inner circle, corroborated Ellison’s testimony by confessing under a plea agreement that, under Bankman-Fried’s directives, he manipulated software to allow unlimited fund drainage from FTX accounts.
