New York CNN –
Two weeks into what could have been a four- to six-week trial, jurors hearing the case against fallen crypto mogul Sam Bankman-Fried have been inundated with evidence that, for now, looks pretty damning.
While the defense has yet to call its own witnesses, it has found itself frequently cross-examining the government, whose testimony in several cases placed Bankman-Fried at the center of a years-long conspiracy aimed at stealing from customers, defrauding investors and all sorts of things to do to cover everything above.
Bankman-Fried, 31, has pleaded not guilty to seven counts of fraud and conspiracy. He is accused of stealing billions of dollars in deposits from customers of his crypto exchange FTX to cover losses at his other company, a crypto trading house called Alameda Research.
In the second week of the trial, prosecutors brought out their big guns. Here are the highlights.
Jane Rosenberg/Portal
Caroline Ellison made a crucial statement against her former boss and ex-boyfriend Sam Bankman-Fried this week.
By far the prosecution’s most important witness is a 28-year-old named Caroline Ellison, who was Alameda’s CEO at the time of the collapse and also dated Bankman-Fried for two years.
“In a case like this, you really need a narrator — someone who can tell the story in a way that the jury can understand,” said Jordan Estes, a former federal prosecutor at the U.S. Attorney’s Office who is now a partner at Kramer Levin. “And the best narrator in any criminal plot is the person closest to the defendant… She was the ultimate insider.”
Her testimony, which spanned three days, was important for several reasons.
- As a close adviser and romantic partner to SBF, Ellison is in the unique position to comment on what was happening in the close inner circle of Alameda and FTX executives, many of whom lived together in a $30 million luxury apartment in the Bahamas.
- She walked the jury through the financial documents she created, saying they were “dishonest” and designed to conceal Alameda’s precarious financial situation. In one case, she prepared seven “alternative” financial statements to present to a lender that had requested financial disclosures.
- Her testimony to the jury was tinged with emotion at times, and she fought back tears as she recounted her “constant state of fear” and the stress of lying to investors, the public and even her own employees.
- She confirmed the testimony of another FTX executive, Gary Wang, who had previously testified that Alameda had a secret and virtually unlimited line of credit to tap FTX customer funds (all of which, of course, was done without the customers’ knowledge or permission and as a coincidence happens). given Bankman-Fried’s public claims that FTX has never touched customer deposits.)
- Ellison described Bankman-Fried’s signature disheveled appearance – including his unkempt hair and wardrobe of cargo shorts and T-shirts – as a deliberate PR move to portray himself as an eccentric entrepreneur.
End effect: Her testimony offered an account of events in which virtually every decision at both Alameda and FTX fell to Bankman-Fried, who was the founder and majority owner of both companies. A common refrain from Ellison when asked who directed her to carry out various acts, criminal or otherwise, was some variation of the words “Sam did it.”
To be clear, Ellison has pleaded guilty and has been cooperating with prosecutors for nearly a year in hopes of securing a lighter sentence for himself. Like Bankman-Fried, Ellison faces a maximum sentence of 110 years in prison.
Bankman-Fried’s defense team questioned Ellison for about six hours Thursday in a meandering, halting back-and-forth that drew repeated objections from the prosecution. At times, Judge Lewis Kaplan sounded annoyed and interrupted to ask lead defense attorney Mark Cohen to clarify what he meant.
Stephanie Keith/Bloomberg/Getty Images
Caroline Ellison, former CEO of Alameda Research, leaves federal court in Manhattan on Thursday.
Jurors later heard from a former software engineer at Alameda named Christian Drappi, who recounted an all-hands meeting at the company’s Hong Kong office on Nov. 9, two days before the entire business collapsed.
Ellison presided over the meeting, which, unbeknownst to her, was recorded by a dealer who had come to Alameda just three days earlier. In response to an employee’s question, Ellison says the decision to repay loans with customer money was “Sam’s decision, I guess.”
The timing makes the recording particularly important.
Statements like the ones Ellison made in the recording are referred to as “prior consistent statements from a witness,” Estes said. “They are very effective because they provide statements that are consistent with what the witness said before they are even approached by law enforcement.”
In other words, Bankman-Fried’s defense would have a hard time arguing that Ellison was pressured or fed a misrepresentation by the prosecution, because on the tape she both admits and states wrongdoing Bankman-Fried made the call before anyone was arrested.
Chinese bribes and “Thai prostitutes”
Although Bankman-Fried is not charged with bribery in this trial, Ellison was allowed to testify about a case in which she believes he directed Alameda to “approx. $100 million to two crypto wallets in China. She said she believed the funds were a bribe to get Chinese officials to release two crypto trading accounts worth around $1 billion that Alameda held in China.
She described the payments as a last resort after other tactics to move the funds out of China failed. One of those failed schemes, she said, was to use accounts of “Thai prostitutes” to conduct transactions that would debit Alameda’s China accounts and transfer values to the sex workers’ accounts, where Alameda could reclaim them.
The biggest question now is whether Bankman-Fried will testify in his own defense.
In a case where the prosecution’s evidence was strong, Estes said, it was a Hail Mary that “can absolutely change the dynamics of a trial.”
Whether you testify or not depends on the individual case and there are risks in both cases. But “if you haven’t figured out your side of things under cross-examination, then this may be one of your only options to do so.”
Prosecutors had expected to present their case around Oct. 25, but there is at least a good chance they will assemble their witness list and wrap it up sooner.
“There is a common government strategy called ‘Thin to Win,'” Estes told CNN. “Once you’ve got most of the evidence of fraud and the pieces of evidence that you need out, then in a sense the only danger is adding more.”