Former CEO of Alameda Research, Caroline Ellison, has made stunning revelations about her ex-boyfriend and former boss, Sam Bankman-Fried. According to Ellison, Bankman-Fried was the one calling the shots at the defunct crypto exchange FTX, as well as her related company.
Ellison claims that Bankman-Fried instructed her to withdraw customer funds from FTX in order to finance investments and loan repayments. She boldly stated, “He directed me to commit these crimes.” Ellison further revealed that Alameda Research took a staggering $14 billion from clients and customers of FTX.
As the prosecution's star witness and a trusted deputy of Bankman-Fried, Ellison's testimony has sent shockwaves through the ongoing trial. Her cross-examination is slated to continue on Wednesday. Here are five key takeaways from Tuesday's explosive testimony.
Alameda and FTX: Insights from Testimony
In a recent testimony, it was revealed that FTX's acquisition of shares in Robinhood worth $648 million was funded by Alameda. Prior to making the stake public, Bankman-Fried, the key figure behind FTX, requested that the shares be transferred to an entity under his control called Emergent Fidelity. The reason for this move was Bankman-Fried's desire to avoid being associated with Alameda.
Additionally, it was disclosed that Alameda's loans were concealed during audits, with Bankman-Fried assuring his colleague, Ellison, that the auditors would not detect them. Ellison, who has already pleaded guilty to several charges including conspiracy and defrauding customers and lenders, previously admitted that both she and Bankman-Fried were fully aware that they were misleading lenders about the separation of FTX and Alameda as distinct entities. Furthermore, they also misrepresented the extent to which the trading firm was borrowing from the FTX platform.
Contrary to their portrayal as separate entities, Ellison stated in her testimony that both Alameda and FTX were initially under the management of the same team. Bankman-Fried played a pivotal role in establishing a system that allowed Alameda to borrow funds from FTX's customers. He also served as the CEO of Alameda when the company began utilizing customer deposits. In response to these claims, Bankman-Fried's defense attorney, Mark Cohen, argued that Ellison should bear some responsibility for the collapse of FTX and criticized her for disregarding Bankman-Fried's advice regarding hedging Alameda's cryptocurrency investments.
Interestingly, Ellison emphasized that Bankman-Fried displayed a keen interest in politics. Alameda not only provided financial support to FTX executives for making political donations but Bankman-Fried himself expressed a slim possibility of one day becoming the President of the United States. His political contributions have been substantial, making him one of the largest individual donors to Democratic candidates during the 2020 and 2022 elections.
Ellison provided further insight into Bankman-Fried's behavior and revealed that he often suggested extremely risky bets. For instance, he would propose a coin flip scenario where the outcome of tails would represent the end of the world, while heads would mean twice as much prosperity. This demonstrated Bankman-Fried's inclination towards taking bold risks.
Professionalizing the Workplace Romance
In the dynamic world of finance, unexpected connections and relationships can form. Such was the case when Ellison, a promising mathematics major from Stanford University, crossed paths with Bankman-Fried, a brilliant "math nerd" fresh out of MIT. Their journey began at Jane Street Capital, a renowned Wall Street trading firm, in 2015. Ellison worked as a summer intern, while Bankman-Fried started his career as a trader.
A Rocky Start for Alameda Research
Fast forward to 2017, Bankman-Fried established his own venture called Alameda Research. Recognizing Ellison's talent and potential, he offered her a role as a trader in 2018. However, before her arrival, Alameda had suffered significant losses and encountered numerous resignations, leaving its future uncertain.
The Complexities of Love and Work
As fate would have it, from the very beginning of their professional journey at Alameda Research, Ellison and Bankman-Fried found themselves entangled in a romantic relationship. While their love blossomed, so too did the complications of simultaneously being boss and partner. As Ellison puts it, "the whole time that we were dating, he was also my boss at work, which created some awkward situations."
The story of Ellison and Bankman-Fried beautifully illustrates the unexpected twists and turns that can arise in the realm of love and work. Their shared experiences at Jane Street Capital and the challenges they faced at Alameda Research undoubtedly shaped their professional and personal lives alike.