Caroline Ellison, the former CEO of Alameda Research and the star witness in the fraud trial of FTX founder Sam Bankman-Fried, took the stand on Tuesday and Wednesday to testify against her ex-boyfriend. Ellison, who pleaded guilty to seven counts of fraud and conspiracy as part of a cooperation deal with prosecutors, said that Bankman-Fried was the mastermind behind a scheme to misuse billions of dollars in FTX customer funds to cover Alameda’s losses and to enrich himself and others.

Ellison said that Bankman-Fried, who was running both Alameda and FTX, ordered her and others to lie to investors, regulators, auditors, and the public about the true nature of the relationship between the two companies. She said that Bankman-Fried had access to a “virtually unlimited” line of credit from FTX, which he used to siphon money from FTX customer accounts to Alameda. She also said that Bankman-Fried issued loans to himself and others from Alameda, using FTX customer funds as collateral.

Caroline Ellison Testifies Against FTX Founder Sam Bankman-Fried in Fraud Trial
Caroline Ellison Testifies Against FTX Founder Sam Bankman-Fried in Fraud Trial

Ellison said that she distributed “dishonest” balance sheets to lenders that concealed billions of dollars in funds that had been transferred from FTX to Alameda. She said that before FTX collapsed in November 2023, it owed its clients $12 billion, but the company had only $4 billion in client holdings. The missing $8 billion had been diverted by Alameda to cover its debts and issue loans to Bankman-Fried and others, according to prosecutors.

Ellison breaks down as she describes the final days of FTX

Ellison became emotional as she described the final days of FTX, when the company faced a liquidity crisis and a regulatory investigation. She said that she had an “overwhelming feeling of relief” because the moment she had been dreading had finally come. She said that she did not have to lie anymore, though she still felt “indescribably bad” about the people “we betrayed.”

Ellison said that she tried to convince Bankman-Fried to come clean and cooperate with the authorities, but he refused. She said that he told her that he was not going to jail and that he had a plan to escape. She said that he asked her to join him in his Bahamas penthouse, where he had stashed millions of dollars in cash and crypto. She said that she declined his offer and decided to cooperate with the prosecutors instead.

Ellison said that she still loved Bankman-Fried, but she also felt angry and betrayed by him. She said that he manipulated her and used her as a scapegoat for his crimes. She said that he leaked her personal diary to The New York Times in an attempt to discredit her as a witness. She said that he also threatened her and her family with violence if she testified against him.

Ellison faces cross-examination by defense lawyers

Bankman-Fried has pleaded not guilty to seven counts of fraud and conspiracy. He has denied any wrongdoing and has accused Ellison of being the real culprit behind the fraud. He has claimed that he was unaware of any illegal activity at Alameda or FTX and that he was misled by Ellison and others.

Bankman-Fried’s defense lawyers began their cross-examination of Ellison on Wednesday afternoon. They tried to undermine her credibility by pointing out inconsistencies in her statements and questioning her motives for cooperating with the prosecutors. They also suggested that she was acting out of jealousy and resentment towards Bankman-Fried, who had broken up with her shortly before FTX collapsed.

The defense lawyers also challenged Ellison’s claim that Bankman-Fried was in charge of both Alameda and FTX. They presented evidence that showed that Bankman-Fried had delegated most of his responsibilities at Alameda to Ellison and other executives. They also argued that Bankman-Fried had no direct access or control over FTX customer funds and that he relied on Ellison and others for financial information.

The cross-examination of Ellison is expected to continue on Thursday. If convicted, Bankman-Fried could face up to 110 years in prison.


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