In the testimony given in Manhattan federal court on Wednesday, a former top executive of Sam Bankman-Fried blamed him for corrupting her values, leading her to lie and steal. She expressed emotional relief when describing the collapse of Bankman-Fried’s cryptocurrency empire, saying she no longer had to lie. The executive, Caroline Ellison, had a romantic relationship with Bankman-Fried for several years and eventually became the CEO of his cryptocurrency hedge fund, Alameda Research. Ellison admitted that Bankman-Fried created justifications for her wrongful and illegal actions that he directed her to take.
During her second day of testimony, Ellison recounted how Bankman-Fried disregarded rules like “don’t lie” and “don’t steal,” claiming that sometimes the ends justified the means. Assistant US Attorney Danielle Sassoon asked Ellison about the impact of Bankman-Fried’s philosophy on her actions, to which she replied that it made her more willing to engage in deceitful and dishonest behavior over time. Ellison went on to detail how she repeatedly used customer deposits at FTX, under Bankman-Fried’s orders, to solve problems at the hedge fund and the exchange.
According to Ellison’s testimony, FTX deposits were withdrawn to fund new investments, political donations, and to hide losses on Alameda’s balance sheet. All of these actions were directed by Bankman-Fried. Ellison became emotional as she described the final days of FTX and Alameda, stating that it was the worst week of her life. She expressed sympathy for the people who were negatively affected when there was not enough money to fulfill the obligations to FTX’s customers and Alameda’s lenders.
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Ellison revealed that she manipulated balance sheets to conceal the fact that Alameda borrowed about $10 billion from FTX customers in June 2022. This occurred during a period of significant decline in the cryptocurrency market when lenders were demanding full repayment. Ellison described being constantly fearful and in a state of dread during this time, worried that a surge in customer withdrawals from FTX would not be able to be met or that their actions would become public. The crash eventually occurred months later. Ellison, aged 28, pleaded guilty to fraud charges in December, while Bankman-Fried was extradited to the United States. Cross-examination is expected to take place on Thursday.
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