This is a developing story and will be updated frequently.
NEW YORK — Caroline Ellison, former CEO of Alameda Research, testified that she committed fraud at the direction of her ex-boyfriend and former colleague, FTX exchange founder Sam Bankman-Fried.
Ellison, 28, is the government’s highly anticipated star witness in the six-week trial of Bankman-Fried. She was the CEO of Alameda Research, the hedge fund prosecutors say stole billions of dollars from customers of its sister company, the cryptocurrency exchange FTX. (Read the government’s indictment here.)
Prosecutors began their questioning of Ellison by asking her if she committed crimes and if so, who she committed them with.
Ellison, who pleaded guilty to fraud and conspiracy charges last year, said she had, and that she had committed them at the direction of Bankman-Fried.
“I sent balance sheets at the direction of Sam that made Alameda’s balances look less risky to investors,” she said, also testifying Alameda had taken funds from FTX to make its own investments.
Ellison also spoke about the “essentially unlimited” line of credit Alameda had at FTX. Bankman-Fried “was the one who set up these systems,” she said.
Her proximity to Bankman-Fried’s business and personal lives is almost certain to give the jury its closest look yet at the decision-making that led to FTX’s epic collapse last November. She has been cooperating with the government since at least December, when she pled guilty to an array of financial crimes stemming from her time at Alameda.
Ellison took the stand Tuesday immediately following testimony from fellow insider Gary Wang, the quiet coder who last week told the court he wrote much of the programming that enabled FTX’s fraud.
Later Tuesday or Wednesday, Bankman-Fried’s defense team will likely cross-examine Ellison with an eye toward discrediting her. In his opening argument lead lawyer Mark Cohen said Ellison ignored instructions from Bankman-Fried to place hedges on Alameda’s trading that could have staunched some of its bleeding.
Defense attorney Christian Everdell opened Tuesday’s proceedings by continuing his cross-examination of Wang, asking a number of questions about what happened in November 2022, the month FTX collapsed, and his subsequent conversations with prosecutors.
Everdell also hinted at a potential defense strategy, asking about Ellison’s decision not to hedge Alameda’s positions.
“It was Ellison’s decision not to hedge, right?” he asked.
“Ellison was the CEO,” Wang said. “I don’t know who made the decision.”
One area of interest was Wang saying he signed a number of promissory notes for loans worth tens of millions of dollars from Alameda.
Judge Lewis Kaplan asked what the $35 million in one loan was for. Wang said it was for a company Bankman-Fried wanted to invest in.
The judge followed up, asking if there were occasions where Bankman-Fried wanted to invest in companies but had someone else do it. “Sam said something about not wanting this to come directly,” Wang said, before cutting himself off briefly.
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The excitement around her testimony was palpable in the press corps. Reporters began arriving at the Daniel P. Moynihan federal courthouse well before sunrise for a chance to see Ellison in person.
