Caroline Ellison, the former chief executive officer of Alameda Research, outlined for a New York jury Wednesday how she worked with Sam Bankman-Fried to deceive lenders and customers to build his multibillion dollar cryptocurrency empire — and their failed attempts to prevent a spectacular collapse.
In her second day of testifying against Bankman-Fried, the FTX co-founder and her former boss, Ellison described how they falsified Alameda balance sheets, discussed bribe payments in China and lied about the financial health of the companies. Ellison, a former Jane Street trader and math whiz from Standford University, has already pleaded guilty and is cooperating with prosecutors.
At one point, Ellison cried on the witness stand as she described what she said was the "worst week" of her life, as FTX and Alameda headed toward bankruptcy in November 2022. "It was something I had been dreading for several months," she told a silent courtroom. Ellison joined Alameda in March 2018 and later began an off-and-on relationship with Bankman-Fried, which they chronicled in a dating diary that she described for the jury.
Here are some of the most revealing details Wednesday from Ellison, who is set to return for cross-examination on Thursday:
Seven balance sheets
In June 2022, as crypto prices spiraled and Alameda's lenders were calling in their loans, Ellison said she prepared seven "alternative balance sheets" that would conceal Alameda's large borrowing from FTX customers, in response to a request for financial information from one of its lenders, Genesis.
Alameda had borrowed around $10 billion from FTX customers and had loaned around $5 billion to FTX executives and affiliated entities. "He suggested I should prepare some alternative ways of presenting the information and send it to him," she said. "I understood him to be directing me to come up with ways to conceal things in our balance sheet we both agreed would look bad."
Bankman-Fried told her to send Genesis her Alternative 7 — which didn't disclose money taken from FTX customers. It cut Alameda's liabilities from $15 billion to around $10 billion. She testified that the document was "dishonest."
'Utilitarian' philosophy
Ellison testified that Bankman-Fried's cavalier attitude toward rules against lying or stealing helped pave the way for her to commit crimes. As a "utilitarian," his philosophy was that the only rule that mattered was doing whatever created the greatest good, she said. T
That attitude "made me more willing to do things like lie and steal," she said. The philosophical approach known as utilitarianism is similar to some of the arguments that propelled the Effective Altruism movement, of which Bankman-Fried was a visible proponent. "When I started working at Alameda, I don't think I would have believed if you told me I would be sending false balance sheets to our lenders or taking customer money," she said. "But over time it was something I felt more comfortable with."
Dating diary
Ellison talked about a private Google document file in which she and Bankman-Fried expressed feelings about their relationship. She discussed unhappiness about their situation and difficulties posed by their overlapping personal and professional relationships.
"It made me feel like sort of an unequal partner in our relationship," she said.
Ellison also recounted how Bankman-Fried blamed her for Alameda's problems after their relationship ended in the spring of 2022. By August of that year, during a conversation at the penthouse they shared in the Bahamas, he brought her to tears.
"Sam started saying that he thought Alameda should have hedged way more earlier in the year, that it was a big mistake, that it was my fault and I was largely responsible for the financial situation," she said.
Bribes in China
Ellison disclosed several discussions with Bankman-Fried and other FTX and Alameda employees about what she believed was a "large bribe" they paid to Chinese officials in November 2021 to get the government to unfreeze $1 billion in Alameda funds that had been caught up in a money-laundering investigation. Ellison said FTX executives first explored various ways to access the funds, but none proved successful. She said Bankman-Fried grew frustrated over the issue, at one point yelling at a trader who objected to the bribe idea to "shut the f—— up."
Binance crackdown
Jurors were shown a note Ellison wrote at Alameda that listed the "things Sam is freaking out about." Fourth on the list was "getting regulators to crack down on Binance," the largest crypto exchange and an FTX competitor. Bankman-Fried believed a crackdown on Binance would be the best way for FTX to gain market share, she said.
'Eccentric' image
Ellison told jurors Bankman-Fried wanted to "cultivate an image of himself as a very smart, competent, somewhat eccentric founder." Bankman-Fried told her he considered his curly black hair to be "very valuable" and believed it contributed to higher bonuses when they worked at Jane Street. Both of them initially drove luxury cars when they moved to the Bahamas, but eventually switched to less valuable vehicles.
"He said he thought it was better for his image to be driving a Toyota Corolla," she said.
Saudi crown prince
As Ellison and Bankman-Fried discussed ways for Alameda to improve its financial position in the fall of 2022, she said he raised the possibility of asking Saudi Arabia's Crown Prince Mohammed bin Salman to buy shares in FTX. The FTX co-founder had dinner with the prince in Riyadh in late October when visiting for a conference, arranged by financier Anthony Scaramucci.
"The rationale was to decrease our risk from further cryptocurrency down-moves," Ellison said, adding the prince was considered a primary target for fresh funding. "We would raise capital by selling FTX equity."
