Star witness appears in accused criminal Sam Bankman-Fried's trial
After more than nine hours of testimony over two days, Caroline Ellison, the most important witness in the government’s case against Sam Bankman-Fried, broke down as she described the final days of the crypto empire she helped build.
Strangely, she said, even though it was “overall the worst week of my life,” she told Bankman-Fried in the moment that it was also “the best mood I’ve been in in a year.” Through tears, she told jurors she had an “overwhelming feeling of relief” because the moment she’d been dreading had finally come. She didn’t have to lie any more, she said, though she still felt “indescribably bad” about the people “we betrayed.”
The moment she’d been dreading was the rapid financial implosion in November of Alameda Research, the crypto hedge fund for which she was chief executive, and FTX, its sister trading platform run by Bankman-Fried, 31, who she says directed her and others to mislead the public and investors about the true nature of the relationship between the two companies.
Earlier in the day, Ellison described how she distributed “dishonest” balance sheets to lenders that concealed billions of dollars in funds that had been siphoned from FTX customer accounts.
Before FTX collapsed, it owed its clients $12 billion, but the company — counter to Bankman-Fried’s assurances on Twitter — had only $4 billion in client holdings, Ellison said. The missing $8 billion had been siphoned by Alameda to cover its debts and issue loans to Bankman-Fried and others, according to prosecutors.
Strangely, she said, even though it was “overall the worst week of my life,” she told Bankman-Fried in the moment that it was also “the best mood I’ve been in in a year.” Through tears, she told jurors she had an “overwhelming feeling of relief” because the moment she’d been dreading had finally come. She didn’t have to lie any more, she said, though she still felt “indescribably bad” about the people “we betrayed.”
The moment she’d been dreading was the rapid financial implosion in November of Alameda Research, the crypto hedge fund for which she was chief executive, and FTX, its sister trading platform run by Bankman-Fried, 31, who she says directed her and others to mislead the public and investors about the true nature of the relationship between the two companies.
Earlier in the day, Ellison described how she distributed “dishonest” balance sheets to lenders that concealed billions of dollars in funds that had been siphoned from FTX customer accounts.
Before FTX collapsed, it owed its clients $12 billion, but the company — counter to Bankman-Fried’s assurances on Twitter — had only $4 billion in client holdings, Ellison said. The missing $8 billion had been siphoned by Alameda to cover its debts and issue loans to Bankman-Fried and others, according to prosecutors.
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00:00 After more than nine hours of testimony over two days, Caroline Ellison, the most important
00:06 witness in the government's case against Sam Bankman-Fried, broke down as she described the
00:11 final days of the crypto empire she helped build. "Strangely," she said, "even though it was overall
00:19 the worst week of my life," she told Bankman-Fried in the moment, "that it was also the best mood
00:24 I've been in in a year." Through tears, she told jurors she had an "overwhelming feeling of relief"
00:31 because the moment she'd been dreading had finally come. "She didn't have to lie anymore," she said,
00:38 "though she still felt indescribably bad about the people we betrayed."
00:42 The moment she'd been dreading was the rapid financial implosion in November of Alameda
00:48 Research, the crypto hedge fund for which she was chief executive, and FTX, its sister trading
00:55 platform run by Bankman-Fried, 31, who she says directed her and others to mislead the public and
01:01 investors about the true nature of the relationship between the two companies. Earlier in the day,
01:08 Ellison described how she distributed dishonest balance sheets to lenders that concealed billions
01:14 of dollars in funds that had been siphoned from FTX customer accounts. Before FTX collapsed,
01:21 it owed its clients $12 billion, but the company, counter to Bankman-Fried's assurances on Twitter,
01:28 had only $4 billion in client holdings, Ellison said. The missing $8 billion had been siphoned
01:36 by Alameda to cover its debts and issue loans to Bankman-Fried and others, according to prosecutors.
01:43 Bankman-Fried has pleaded not guilty to seven counts of fraud and conspiracy.
01:48 His defense briefly began to cross-examine Ellison on Wednesday before Judge Louis Kaplan declared,
01:56 "It's been a long day," and suggested the court adjourn a half-hour early.
02:00 Defense lawyers will continue cross-examining Ellison on Thursday.
02:05 Ellison, who dated Bankman-Fried off and on over two years while working at Alameda,
02:12 pleaded guilty to seven counts of fraud and conspiracy as part of a cooperation deal
02:17 with prosecutors. Over two days, Ellison offered a version of events in which one person,
02:24 Bankman-Fried, ordered his inner circle to engage in criminal activity.
02:29 Even though she was the CEO of Alameda, Bankman-Fried was actively overseeing both it and
02:36 FTX, she testified. Bankman-Fried could face 110 years in prison if convicted and given the maximum
02:44 sentence. Virtually unlimited line of credit. The prosecution's case hinges on evidence that
02:52 Bankman-Fried stole billions of dollars in FTX customer funds to cover Alameda's losses
02:58 and to enrich himself and others. With money siphoned directly from FTX customer accounts,
03:05 prosecutors say, Bankman-Fried splurged on luxury real estate and funneled millions of dollars
03:11 in donations to U.S. political campaigns. In setting up a secret facility that allowed Alameda
03:18 to borrow from FTX, Bankman-Fried and other executives lied to investors and deceived
03:25 customers who trusted that their money could be withdrawn at any time. Ellison and other
03:31 witnesses have testified that Alameda, which engaged in high-risk crypto trading, had a secret
03:37 and virtually unlimited line of credit with FTX that allowed it to tap into money that belonged
03:42 to unwitting customers who had deposited money on the exchange. Prosecutors' evidence so far
03:49 suggests FTX's creation in 2019 was primarily driven by Bankman-Fried's desire for a large
03:56 source of capital beyond the third-party loans that Alameda relied on. Things Sam is Freaking
04:03 Out About On Wednesday, Ellison also walked jurors through some of her past personal to-do
04:09 lists that she kept on Google Docs, including one titled "Things Sam is Freaking Out About,"
04:15 which said she updated regularly to keep tabs on the issues Bankman-Fried was fixated on.
04:22 Entries under that title included "Getting Regulators to Crack Down on Binance," a reference,
04:28 she said, to what Bankman-Fried believed was the best potential ways to improve FTX market
04:34 share by attracting customers from FTX's biggest rival. This was something that, according to
04:41 Ellison, he claimed regulators had been promising for a while, but it never happened. Binance,
04:48 which is currently under intense regulatory scrutiny in the United States, briefly emerged
04:54 as a potential savior for FTX when its business was in freefall in November of 2022, but it pulled
05:01 out of the deal after Binance determined FTX's problems were beyond our control or ability to
05:07 help. The list also included "Buying Snap," which Ellison explained as Bankman-Fried's plan to
05:14 acquire the parent company of Snapchat. The entry "Raising from MBS" referred to Bankman-Fried's
05:21 efforts to raise capital from Saudi Arabia's Crown Prince Mohammed bin Salman.
05:26 Very Valuable Hair In her afternoon testimony on Wednesday,
05:32 Ellison said Bankman-Fried's "disheveled appearance" was a calculated PR strategy.
05:37 "He thought his hair had been very valuable," she said, adding that Bankman-F
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