Caroline Ellison testified Thursday in Sam Bankman-Fried’s federal fraud trial that in the final days of Alameda Research, she admitted wrongdoing to her employees in an all-hands meeting, telling them the decision to borrow funds from customers of their sister firm, FTX, was “Sam’s, I guess.”
“I never liked misleading my employees,” she told jurors. But as Alameda faced bankruptcy, she “felt trapped,” and wanted to be “open and honest in answering my employees’ questions.”
The statements came at the tail end of her three-day testimony in the trial of Bankman-Fried, her former boss and ex-boyfriend, who she says directed her and others to engage in a multibillion-dollar fraud over several years.
At several points in her tenure as the CEO of Alameda, she wanted to quit, she said, but that Bankman-Fried told her she couldn’t because she was “too important to Alameda.”
Ellison’s testimony offered rare insights into the rise and fall of Bankman-Fried’s crypto empire, in which she was both his trusted adviser and on-and-off romantic partner. She has pleaded guilty to seven counts of fraud in cooperation with prosecutors.
Bankman-Fried’s lead defense attorney sought to undermine her narrative on cross-examination, emphasizing that Ellison had autonomy as CEO of the crypto trading firm, which was founded and majority owned by Bankman-Fried.
Cohen suggested that Ellison’s own decisions played a role in the collapse of Alameda and its sister exchange, FTX.
In one instance, he asked Ellison, 28, about a $100 million loss Alameda booked when the algorithmic stablecoin Luna crashed in the spring of 2022. Ellison stated that in hindsight, she thought it was a bad idea for Alameda to have held so much of that asset and should have sold it.
The defense has yet to present its case, but Cohen has hinted that he will try to show that Ellison and others acted on their own at times, and that what prosecutors call fraud was in fact a series of honest business mistakes.
“Sam didn’t defraud anyone,” Cohen said in his opening statement last week. “Sam acted in good faith in trying to build and run FTX and Alameda.”
But “things were happening quickly, very quickly,” Cohen said. “Sam and others made hundreds of decisions a day … as a result, some things got overlooked.”
In Ellison’s telling, she and other members of Bankman-Fried’s inner circle worked together to take the FTX customer funds and lie to investors about the true nature of the two firms’ financial codependence. Ellison herself produced phony financial documents to present to lenders to try to hide Alameda’s borrowing from FTX.
At every turn, Ellison told jurors, it was Bankman-Fried ultimately calling the shots.
By November of last year, when both companies were collapsing, she described an “overwhelming sense of relief” that the inevitable end was finally coming into view. It was “overall the worst week of my life,” but she was glad she wouldn’t have to lie anymore.
That version of events reflects US prosecutors’ contention that Bankman-Fried, 31, orchestrated a yearslong fraud and engaged his business partners in a conspiracy to lie about their crimes.
Bankman-Fried has pleaded not guilty to seven criminal counts and could spend the rest of his life in prison if convicted and given the maximum sentence. Ellison and other executives have pleaded guilty and struck cooperation agreements with prosecutors in the hopes of reducing their sentences.
This story is developing and will be updated.
