Sam Bankman-Fried, the founder of bankrupt cryptocurrency exchange FTX, arrives in court at a courthouse in New York, U.S., on August 11, 2023, as lawyers push to convince the judge overseeing his fraud case not to let him appear to be sent to prison for trial. Portal /Eduardo Munoz//File Photo Purchase license rights
NEW YORK, Oct 10 (Portal) – Caroline Ellison, the former managing director of Sam Bankman-Fried’s hedge fund Alameda Research, testified on Tuesday that she committed fraud with the former crypto mogul.
Ellison, who was also once Bankman-Fried’s romantic partner, is one of three former members of the 31-year-old former billionaire’s inner circle who have pleaded guilty to fraud charges and agreed to cooperate with the U.S. attorney’s office in Manhattan.
“Alameda took billions of dollars of money from FTX customers,” Ellison said on the witness stand, adding that Alameda used the money for investments and to repay its lenders.
Prosecutors say Bankman-Fried used stolen FTX customer funds to repay Alameda’s lenders, buy real estate and donate to U.S. political candidates to bolster his influence in Washington.
Bankman-Fried pleaded not guilty, arguing that while he made mistakes in running FTX, he never intended to steal funds. In his opening statement last week, defense attorney Mark Cohen asked jurors to ask themselves whether cooperating witnesses like Ellison were putting a new, nefarious twist on old decisions made by Bankman-Fried that they had originally agreed with.
Gary Wang, FTX’s former technology chief, testified last week that Bankman-Fried instructed him to allow Alameda to maintain a negative balance on FTX and borrow up to $65 billion from the exchange – privileges that other customers were missing. A third cooperative witness, former FTX chief engineer Nishad Singh, is also expected to testify at the trial, which could last up to six weeks.
The jury has already heard a lot about Ellison. Cohen said in his opening statement that Bankman-Fried advised Ellison to hedge Alameda’s bets against a downturn in cryptocurrency markets, but she failed to do so.
Without mentioning Ellison by name, prosecutor Thane Rehn said in his opening statement that Bankman-Fried had installed her as Alameda’s “front woman” but that Bankman-Fried was still in charge.
Adam Yedidia – a former FTX software engineer who lived with Bankman-Fried, Ellison and seven others in a $35 million penthouse in the Bahamas near the company’s headquarters – testified Thursday that Bankman-Fried told him in early 2019 said that he and Ellison had had sex and asked him for advice about whether he should go out with her.
“I said no,” Yedidia said. “He said he thought it was reasonable and said I would say something like that.”
While Bankman-Fried has written blog posts and given interviews to reporters since his arrest in December 2022, Ellison has kept a low profile since pleading guilty that same month.
In July, The New York Times published an article citing Ellison’s private writings from before FTX’s collapse, in which she described feeling overwhelmed at work and hurt by the breakup with Bankman-Fried. After defense attorneys admitted that Bankman-Fried had shared the documents with a Times reporter, U.S. District Judge Lewis Kaplan revoked his $250 million bail and sent him to prison on probable witness tampering charges.
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Reporting by Luc Cohen and Jody Godoy in New York; Edited by Noeleen Walder, Nick Zieminski and Matthew Lewis
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