On Wednesday, Caroline Ellison, a top advisor to cryptocurrency mogul Sam Bankman-Fried, testified in his fraud trial. She admitted to having lied repeatedly to him and the public, circulating false information about his business. Ms. Ellison also revealed that crypto lenders require financial documents and that Time is of the essence.
The implosions of Mr. Bankman-Fried’s two companies – FTX, a digital currency exchange, and Alameda Research, a hedge fund – in November had been too much for her to take. Ms. Ellison shared intimate details about the turbulent love affair she and Mr. Bankman-Fried had in their office while FTX grew from a $22 billion crypto giant to a behemoth.
The 31-year old has been charged with orchestrating a plot to make FTX his personal piggybank. He has pleaded guilty to seven charges of criminal offense, including one for defrauding lenders and could face a sentence of life imprisonment if convicted.
Ms. Ellison has been widely considered the government’s star witness, partly because she dated Mr. Bankman-Fried. She has been able to observe the FTX founder’s crypto empire grow as he has been in contact with her on and off over many years. In December, she pleaded guilty for fraud and conspiracy, and in exchange for leniency, agreed to cooperate with the prosecutors. Gary Wang and Nishad Singh, two top FTX executives, have also pleaded guilt and are cooperating fully with the government.
Ms. Ellison walked through the history of FTX’s financial problems, telling jurors that the exchange started falling apart in the spring of 2022, when the cryptomarket crashed. Alameda’s lenders began asking for money back in June and its own crypto assets had plunged in value during the market downturn, meaning the firm had little way to make its lenders whole.
To find out more about the newest way to hide Alameda’s fragile financial state, Mr. Bankman-Fried told Ms. Ellison to give one of the firm’s biggest lenders — a crypto company called Genesis — a misleading balance sheet that concealed that Alameda FTX had borrowed about $10 billion from its customers.
In the middle of 2022, their relationship deteriorated. During a heated conversation with him in August, she cried and broke down when he blamed her for Alameda’s financial troubles.
Alameda also made a decision to unlock $1 billion that it had frozen in its trading accounts at two Chinese exchanges. In March, prosecutors charged Mr. Bankman-Fried with having paid bribes to corrupt officials totaling tens of millions of dollars.
Ms. Ellison also testified about large payments Alameda had made, and her willingness to accept Mr. Bankman-Fried’s schemes. She explained that over time, his beliefs began to rub off on her, making her more willing to do things such as lie and steal.
Mr. Bankman-Fried’s lawyers will question Ms. Ellison on Thursday and the trial will resume.
