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Ellison Testifies She, FTX Chief Committed Fraud

Ellison Testifies She, FTX Chief Committed Fraud
Sam Bankman-Fried's former girlfriend, Caroline Ellison, walks through security at Manhattan Federal Court on October 10, 2023, in New York, during the fraud trial against the FTX founder. (Bryan R. Smith/Getty Images)

Tuesday, 10 October 2023 03:09 PM EDT

Caroline Ellison, the former chief executive officer of Sam Bankman-Fried's hedge fund Alameda Research, testified on Tuesday that she committed fraud together with the former crypto mogul.

Ellison, who said she previously dated Bankman-Fried, is one of three former members of the 31-year-old former billionaire's inner circle who have pleaded guilty to fraud charges and agreed to cooperate with the Manhattan U.S. Attorney's office.

$10 BILLION TAKEN

"Alameda took several billion dollars of money from FTX customers and used it for our own investments and to repay debts that we had," said Ellison, one of the trial's most highly anticipated witnesses.

She said Bankman-Fried directed Alameda to take around $10 billion in FTX customer money to repay loans, and that he told her to share a misleading Alameda balance sheet with the fund's lenders that made the fund's finances look less risky than was truly the case.

When asked why FTX ran out of money in November 2022, when the exchange declared bankruptcy, Ellison said, "Alameda had taken it to make our own investments and to repay our lenders."

Prosecutors say Bankman-Fried plundered billions in customer funds to prop up Alameda, buy real estate and donate more than $100 million to U.S. political campaigns.

Bankman-Fried has pleaded not guilty to two counts of fraud and five counts of conspiracy, and has argued that while he made mistakes running FTX, he never intended to steal funds.

In his opening statement last week, defense lawyer Mark Cohen told jurors to question whether cooperating witnesses like Ellison were putting a new, nefarious spin on old decisions by Bankman-Fried which they had originally agreed with.

$65 BILLION LOAN

Gary Wang, FTX's former technology chief, testified that Bankman-Fried directed him to allow Alameda to run a negative balance on FTX and borrow up to $65 billion from the exchange - privileges other customers lacked. A third cooperating witness, former FTX engineering chief Nishad Singh, is also expected to testify at the trial, which could last up to six weeks.

Ellison testified that she met Bankman-Fried while both were working at Jane Street, a Wall Street trading firm. Bankman-Fried left in 2017 to found Alameda, and Ellison followed when he offered her a job as a trader.

"He was very ambitious," Ellison told the court, adding that Bankman-Fried spoke frequently of wanting to use his money to have influence on politics and even told her there was a 5% chance he would become president of the United States one day.

But shortly after she joined, Ellison said Alameda's lenders asked for their money back. She said it was a "big priority" for Bankman-Fried to get more loans so Alameda could make more trades, or make investments and acquisitions.

Bankman-Fried eventually turned to FTX for funds to use for Alameda's trading, Ellison said, adding that to her knowledge FTX customers were not aware their deposits were being used in that way.

"He said that FTX would be a good source of capital and he set up the system that allowed Alameda to borrow from FTX," Ellison said.

While Bankman-Fried has written blog posts and granted interviews to reporters since his December 2022 arrest, Ellison has maintained a low profile since she pleaded guilty that same month.

In July, the New York Times published a story citing Ellison's private writings from before FTX's collapse in which she described feeling overwhelmed at work and hurt by a breakup with Bankman-Fried. After defense lawyers acknowledged that Bankman-Fried had shared the writings with a Times reporter, U.S. District Judge Lewis Kaplan revoked his $250 million bail and sent him to jail for probable witness tampering.

© 2025 Thomson/Reuters. All rights reserved.


StreetTalk
Caroline Ellison, the former chief executive officer of Sam Bankman-Fried's hedge fund Alameda Research, testified Tuesday that she committed fraud together with the former crypto mogul.
sam bankman-fried, ftx, fraud trial, caroline ellison
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2023-09-10
Tuesday, 10 October 2023 03:09 PM
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