From companion to prosecution witness. Caroline Ellison, the former girlfriend of Sam Bankman-Fried, on Tuesday described the ex-cryptocurrency idol as capable of drawing, without qualms, from client funds to fuel his risky projects. “He was the boss of Alameda and the owner of Alameda and he gave me instructions to commit these crimes,” Caroline Ellison said at the federal trial of “SBF” in New York, a year after the bankruptcy from the crypto exchange platform FTX.
This Stanford University mathematics graduate was named, by the accused, in 2021, head of the Alameda Research hedge fund, whose activities were largely financed by money from clients of the cryptocurrency exchange platform. FTX, without their knowledge.
Co-founded in 2019 by Sam Bankman-Fried, FTX filed for bankruptcy in November 2022 after many customers, learning that their funds had been used in this way, sought to recover their stake. After the bankruptcy, some eight billion dollars were missing.
14 billion dollars pumped
Sam Bankman-Fried is accused of having set up this system of communicating vessels between FTX and Alameda, while concealing it from the platform’s clients, investors and creditors.
Alameda pumped some $14 billion into FTX’s accounts in total, estimated at the hearing Caroline Ellison, who indicated that she had been in a relationship with “SBF” for “about two years”.
“Alameda took billions of dollars to make investments and repay debts,” she explained, indicating that in addition to FTX customers, platform investors and Alameda creditors had been misled about the the state of the finances of the two companies. “Many of these investments were highly speculative,” she said.
“SBF” “set up the system”
The 28-year-old American pleaded guilty to seven counts in December and collaborated with Manhattan federal prosecutor Damian Williams. She agreed to testify at the trial of Sam Bankman-Fried and should receive, in exchange, a reduced sentence, which has not yet been pronounced.
Questioned by Danielle Sassoon, assistant federal prosecutor in Manhattan, about the nature of the acts she admitted to having committed, she mentioned “fraud, criminal conspiracy to commit fraud, and money laundering”.
Also charged with seven counts, Sam Bankman-Fried faces more than a hundred years in prison if convicted.
Since the bankruptcy, “SBF” has regularly accused Caroline Ellison of faults and negligence in the management of Alameda. He assured that he no longer followed the daily activities or the financial situation of Alameda during the last months preceding the failure of FTX, relying on his boss, even if he was still the majority shareholder.
But during his hearing Friday, FTX co-founder Zixiao “Gary” Wang maintained that Sam Bankman-Fried continued to closely monitor the operations of Alameda until the bankruptcy filing. “It was he who set up the system” which made it possible to siphon funds from FTX clients, assured Caroline Ellison. And even once at the head of Alameda, “I submitted major decisions to Sam,” she said. “He was the person I reported to. He owned Alameda. He could have fired me if he wanted. »
Political donations to the Democratic Party
This former quantitative analyst (who develops mathematical models for market finance), claimed to have, on numerous occasions, expressed reservations about the relationship between FTX and Alameda.
“It concerned me because it was something that the clients were not informed about, and they would not have been happy to know about it,” she said during her hearing.
Caroline Ellison said she had also raised concerns, with “SBF”, about personal loans granted by Alameda to Sam Bankman-Fried, as well as to other directors or companies affiliated with them, for around five billion dollars, without elicit a reaction from the person concerned.
The accused notably praised the interest of using part of these loans to make donations to political figures, the young woman mentioning, at the hearing, American President Joe Biden.
In addition to the drains on FTX, Sam Bankman-Fried “asked us to borrow as much money as we could, from all possible sources and whatever the conditions,” described the former leader of Alameda. Despite these acrobatics, the accused defined his approach to risk as “neutral”, according to Caroline Ellison.