Ex-Alameda CEO Caroline Ellison Admits Committing Financial Crimes Under Sam Bankman-Fried’s Direction
Caroline Ellison, the ex-CEO of Alameda and alleged ex-girlfriend of Sam Bankman-Fried (SBF), admitted committing financial crimes under his direction and revealed details about SBF’s personal and business affairs.
In a courtroom drama that has captivated the financial world, Caroline Ellison, the ex-CEO of Alameda and alleged ex-girlfriend of Sam Bankman-Fried (SBF), took the witness stand today during SBF’s ongoing trial (Day 5). She admitted committing financial crimes under the direction of SBF, sending shockwaves through the courtroom.
Assistant United States Attorney (AUSA) Sassoon wasted no time in grilling Ellison about her connection to the defendant. But Ellison responded with succinct clarity, “At Jane Street then Alameda. We dated for a couple of years.” When pressed about the nature of her crimes, Ellison responded in the affirmative, “Fraud.”
AUSA Sassoon’s inquiry into her involvement with others in these crimes also received a straightforward response — admitting “Yes.”
AUSA: What was his involvement in the crimes?— Inner City Press (@innercitypress) October 10, 2023
Ellison: He was the head of Alameda then FTX. He directed me to commit these crimes.
AUSA: What makes you guilty?
Ellison: Alameda took several billions of dollars from FTX customers and used it for investments.
The courtroom buzzed with anticipation as Ellison, at first seemingly unsure, later identified SBF in the courtroom. AUSA Sassoon pressed on, asking about SBF’s role in the crimes. Ellison didn’t mince words, admitting, “He was the head of Alameda then FTX and directed me to commit the crimes.”
When questioned about her guilt, Ellison revealed a startling revelation, “Alameda took several billions of dollars from FTX customers and used it for investments.”
She didn’t stop there; she elaborated on how SBF had orchestrated the entire operation, saying, “SBF set up the systems and told Alameda’s team to take the money.” The scale of the financial deception was staggering as Ellison disclosed that Alameda had taken approximately $14 billion to repay its lenders.
AUSA: What was the defendant's role?— Inner City Press (@innercitypress) October 10, 2023
Ellison: He set up the systems and told us to take the money.
AUSA: How much did Alameda take to repay its lenders?
Ellison: In the ballpark of $10 billion. Ultimately around $14 billion
AUSA Sassoon delved further into the mechanics of the fraud, questioning, “How did you defraud Alameda’s lenders?”. Ellison, who had pleaded guilty to fraud and conspiracy charges the previous year, did not shy away from implicating SBF in her actions, stating, “I sent balance sheets at the direction of Sam that made Alameda’s balances look less risky to investors.”
She also disclosed how Alameda had tapped into funds from FTX to fuel its own investments, painting a grim picture of financial mismanagement. Post these revelations, the court broke for lunch.
What makes Ellison’s testimony even more intriguing is her close proximity to both SBF’s personal and business affairs. It shed light on a series of financial maneuvers and high-stakes decisions that have captivated the ongoing trial.
She shared that SBF once claimed to have a mere 5 percent chance of becoming the President of the United States. He characterized himself as the type of individual willing to take extreme risks, even suggesting he’d flip a coin to determine the fate of the world.
Assistant US Attorney Danielle Sassoon meticulously examined the documents provided by Ellison, with a particular focus on one from the fall of 2021. In this document, SBF had tasked Ellison with assessing the consequences of a “10th percentile scenario.” At that time, Bankman-Fried was contemplating a substantial $3 billion investment in venture capital.
However, SBF wanted to know the potential outcomes if this decision coincided with a downturn in the cryptocurrency market, declines in existing venture investments and stocks, Genesis (a cryptocurrency company) discontinuing the use of Alameda’s FTT tokens as collateral, and adverse FTX-related news hampering equity fundraising.
Ellison’s analysis was unequivocal: Investing the $3 billion would expose Alameda to an extreme level of risk and would essentially render the company unable to meet its obligations if lenders called for loan repayments. This assessment painted a grim picture of the consequences of SBF’s bold investment plan.
In response to these findings, Ellison disclosed that Bankman-Fried proposed a modification to the loans, shifting them from open-term (subject to recall at any time) to fixed-term. However, despite these reservations, SBF went ahead and established a $2 billion venture fund. This move, as per Ellison’s testimony, illustrated a willingness to take significant risks, even in the face of a perilous financial outlook.
The courtroom testimony also unveiled a more personal side of SBF, with Ellison sharing anecdotes and quotes that offered a glimpse into his character. She recounted an instance where SBF had purportedly expressed a mere 5 percent chance of becoming the President of the United States, highlighting his audacious personality. In another revealing anecdote, Ellison claimed that SBF described himself as the kind of person who would be willing to flip a coin, with heads signifying a doubly prosperous world and tails resulting in its destruction.
Caroline Ellison’s revelations provide a deeper understanding of the high-stakes decisions and financial gambles made by Sam Bankman-Fried. The ongoing trial promises further insights into the intricate web of financial operations and dynamics that led to the downfall of FTX.
Ellison’s appearance on the witness stand followed testimony from Gary Wang, an insider who had previously revealed that he had written a significant portion of the code that enabled FTX’s fraudulent activities.
In the coming days, Bankman-Fried’s defense team is expected to cross-examine Ellison, aiming to discredit her testimony. Mark Cohen, the lead defense lawyer, had argued in his opening statement that Ellison had ignored instructions from SBF that could have potentially mitigated some of Alameda’s losses.
As the trial unfolds, the financial world watches with bated breath, awaiting the outcome that could have far-reaching implications for the world of cryptocurrency and financial markets.
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