Caroline Ellison, the previous head of Sam Bankman-Fried’s crypto hedge fund and the federal government’s star witness within the felony fraud case in opposition to the FTX founder, testified Tuesday that she and her ex-boss defrauded clients, buyers and lenders.
“Sure, we did,” Ellison stated, when Danielle Sassoon, assistant U.S. lawyer, requested if she dedicated a criminal offense. “I imply Sam and I and others.”
From a courthouse in downtown Manhattan, Ellison then listed her crimes: “fraud, conspiracy to commit fraud and cash laundering.”
Ellison, who ran Alameda Analysis, pleaded responsible in December to 2 counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit cash laundering. A part of the 28-year-old’s plea take care of the federal government has concerned cooperating with the prosecution’s case in opposition to Bankman-Fried.
Ellison’s testimony began at 12:37 p.m. and lasted lower than 10 minutes earlier than the courtroom broke for lunch. It’s going to resume at about 2 p.m.
Donning a purple gown with a free grey blazer and glasses, Ellison offered a quick background of how she bought to know Bankman-Fried. They met when she was an intern at Jane Road, a proprietary buying and selling agency in New York. They later labored collectively at Alameda and dated for a few years, she stated.
Ellison was one in all Bankman-Fried’s earliest recruits to Alameda in 2017. Bankman-Fried had reportedly satisfied the Stanford graduate to ditch her job at Jane Capital to affix Alameda as a dealer when the hedge fund was nonetheless in its authentic workplace within the San Francisco Bay space.
When requested by Sassoon to determine the defendant, Ellison stood up and, for nearly 30 seconds, seemed across the room. She turned her head all the way in which to the left to the jury field and again to the fitting once more a number of occasions earlier than lastly figuring out Bankman-Fried as sitting “over there and sporting a swimsuit.” The 2 hadn’t made eye contact when Ellison walked by earlier. Bankman-Fried, who was recognized for his floppy hair and seaside shorts, bought a recent haircut previous to the trial, reportedly from a fellow inmate on the jail in Brooklyn the place he has been held since August.
Ellison stated Bankman-Fried was the unique CEO and proprietor of Alameda.
“Sam directed me to commit these crimes,” she stated. He “directed us to take buyer cash to pay loans.”
Bankman-Fried, 31, faces seven federal fees, together with wire fraud, securities fraud and cash laundering, all tied to the collapse of FTX and Alameda late final 12 months. If convicted within the trial that started every week in the past, Bankman-Fried might spend his life in jail. He has pleaded not responsible.
Central to the case in opposition to Bankman-Fried is the billions of {dollars} that flowed from buyer accounts at FTX to Alameda, which had an enormous gap in its stability sheet after the crypto markets turned in 2022.
Ellison stated Alameda took a number of billion {dollars} from FTX clients and that Bankman-Fried had not solely arrange a system to steal the funds, but additionally directed Ellison and others to make use of buyer funds to repay loans within the ballpark of $10 billion.
“We finally took round $14 billion, a few of which we have been in a position to pay again,” she stated. “I despatched stability sheets to lenders on the course of Sam that incorrectly acknowledged Alameda’s belongings and liabilities.”
She stated the numbers have been adjusted to make Alameda look much less dangerous as an funding.
Following lunch recess, Ellison was requested about her relationship with Bankman-Fried. She stated that whereas they began sleeping collectively infrequently in 2018, not lengthy after she started at Alameda, they started courting in the summertime of 2021. The connection was on-again, off-again till the spring of 2022, once they broke up for good.
Ellison stated she rapidly found after being employed that Alameda was in a lot worse form than she’d anticipated. The agency had suffered giant losses, lenders had pulled out and plenty of workers had stop.
Relating to the comingling of funds, Ellison stated Bankman-Fried was nonetheless CEO of Alameda when the apply of funneling cash from FTX to the hedge fund started. Ellison stated she was below the impression that it was FTX buyer cash as a result of the sums exceeded the alternate’s income and the quantity of capital it exhausting raised.
In mid-2021, when FTX purchased fairness within the firm again from rival alternate and early investor Binance, the corporate used $1 billion in FTX buyer cash for the transaction, Ellison testified. That adopted an in-person dialog between Ellison, Bankman-Fried and Sam Trabucco, Alameda’s co-CEO.
“We do not actually have cash for this,” Ellison recalled saying. “We’ll should borrow from FTX to do it.”
Bankman-Fried informed her that was OK as a result of it was necessary and “we’ve got to get it executed,” she stated.
WATCH: Caroline Ellison testifies Sam Bankman-Fried directed her to commit crimes