Caroline Ellison Buried Sam Bankman-Fried

When crypto exchange FTX spectacularly collapsed in November 2022, industry participants laid at least part of the blame to a tweet from an executive at a different, related company.

“If you’re looking to minimize the market impact on your FTT sales, Alameda will happily buy it all from you today at $22!” tweeted Caroline Ellison, CEO of Alameda Research and a key lieutenant of Sam Bankman-Fried, who founded both Alameda and FTX.

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By publicly declaring a floor price for FTT, FTX’s exchange token, Ellison contributed to a sequence of events that ultimately led to FTT’s price tanking, FTX and Alameda filing for bankruptcy and Ellison testifying against her former boss, and boyfriend, in court.

The Stanford University graduate and former Jane Street trader took the stand in mid-October to tell a federal judge, jury and members of the public that she committed fraud, laundered money and conspired to defraud FTX’s customers and investors, and Alameda’s lenders.

And to be clear, those crimes “were committed with Sam.”

Taking the stand

Ellison, who was raised Catholic, was a star witness in one of the biggest fraud cases to ever go to trial. She took the stand three days in a row, and gave testimony about how she was an integral member of a four-person team who took money that didn’t belong to them, and spent it primarily to gamble, purchase real estate and influence U.S. elections and regulations.

She sobbed (briefly). She was discussing emotional things. Like the weight of a multi-billion dollar fraud lifting, when FTX finally crumpled, and falling in love with a dismissive, emotionally manipulative man, who suffers from depression and anhedonia. He told her once she could never make him happy, that nothing could, and yet she tried.

Ellison was just one of many witnesses in the biggest trial crypto has seen, but her role as one of FTX’s public faces – perhaps the second-best known after Sam himself – drew the second-largest crowd to the courthouse in lower Manhattan.

At Alameda, he was regularly updating balance sheets and knew fully well whether the trading firm could repay its lenders at any time, she said. By mid-June 2022, the answer was no.

“I was in sort of a constant state of dread at that point,” she said when describing her mental state at the time. “I knew that we would have to take the money from our FTX line of credit and I knew that that was money that could be called at any time, and every day, I mean, I was worrying about the possibility of customer withdrawals from FTX and the possibility of this getting out and what would happen to people that would be hurt by that.”

But it’s still Sam

Ellison and Bankman-Fried met at Jane Street, a Wall Street quant fund that only accepts the brightest. She was considering a one-year master’s degree program in math, but was persuaded to join Sam’s private venture, which she knew little about. She didn’t know anything about crypto at the time. She was one of Alameda’s first hires, one of a few with trading experience. She called it a “lateral” move.

When DeFi Summer (2020) happened, those hazy days when random (often food-related, for some reason) protocols printed yield, when interest rates everywhere else were nil, she learned how to use the MetaMask wallet. Her trades, infamously, relied on “elementary school math” and gut.

Later on, when things were turning south, Sam chided her for not “hedging.” She told him there was a 100% chance they’d go broke if he started a venture fund; she did the math, she later said in court. He started a venture fund.

Her co-CEO, the better risk manager, she said, had checked out mentally, long before he officially left in August 2021. His name was also Sam. He bought a boat and named it “Soak My Deck.” It remains a mystery where Sam Trabucco is today, or why he wasn’t at the trial. As effective altruists, Bankman-Fried and his entourage all believed in “earning to give,” and practiced it like a religion. But the group’s code of ethics had no answer to whether it is wrong to steal. It depends, their prophets likely would have said. Did you calculate the expected value?

They all communed with their prophets. Sam, not the one with the yacht, just a plane, thought he could be president. He had a 5% chance, he said. What were they thinking?

It’s easy to imagine Ellison alone, in that Bahamian penthouse with nine roommates including Bankman-Fried. Stimulants, his and her gas, can be isolating. It’s rumored they all got prescriptions to focus. Bankman-Fried kept odd hours, and would take a call from anyone at seemingly any time. He shakes.

The story of Ellison is inextricably wrapped up with the story of Bankman-Fried. Much of the public narrative about her centers around her role at Alameda – except for conversations about the Tumblr blog she (allegedly) posted on or the tweets.

Though she was officially the one in charge of Alameda at one point, and was the one tracking the books, she testified in court how she wasn’t really in charge of anything. She didn’t even have equity in Alameda, unlike her fellow inner circle members.

Early on in her time at Alameda, she said, her duties included “a variety of things; everything from doing research and working on our trading models to monitoring automated systems to moving things like Bitcoin around the different exchanges.”

With Sam now facing potentially decades in prison, compared to her own likely much lighter sentence, there’s a chance for her story to change.