Written by: Song Xue, LianGuai
On October 11, 2023, LianGuai reported that Sam Bankman-Fried’s ex-girlfriend, Caroline Ellison, has testified in the SBF case. Her testimony is the most important evidence in SBF’s high-risk criminal trial to date. (Related reading: “What can we expect from Caroline Ellison’s testimony as SBF’s ex-girlfriend?”) Ellison’s testimony is crucial in the SBF case: SBF instructed her to commit crimes; SBF wanted to be the President of the United States; FTX and Alameda were initially operated by the same team, and it also mentioned their relationship issues and her exorbitant bonuses… This testimony helps us better understand how SBF’s business empire collapsed.
1. Who is Caroline Ellison?
Caroline Ellison is the former CEO of Alameda Research and SBF’s ex-girlfriend. She is also the star witness in the government’s case against this disgraced crypto prodigy.
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Ellison is a 28-year-old graduate of Stanford University. Her on-and-off relationship with SBF lasted for several years. Ellison was the CEO of Alameda Research, a cryptocurrency trading company founded by SBF, which allegedly misappropriated $8 billion of user funds from FTX.
SBF’s lawyer has hinted that Ellison may be the real party responsible for the collapse of Alameda. He painted a picture in which Ellison was busy running FTX and other tasks, delegating the operation of the trading company to her carefully selected deputy.
2. What is Ellison’s testimony?
1. SBF instructed her to commit crimes, SBF is the ultimate decision-maker of FTX Empire
In her testimony in court, Ellison stated, “Alameda took billions of dollars from FTX clients and used them for their own investments and to repay creditors. We ultimately took about $14 billion, some of which we had the ability to repay.”
She firmly accused SBF of being guilty in planning the massive fraud of FTX and Alameda. Ellison took the witness stand and was asked to confirm her former boss and boyfriend, stating, “He instructed me to commit these crimes.” Ellison pleaded guilty to seven felony charges last December. Meanwhile, SBF denied all the charges against him.
She pointed out that SBF is the ultimate decision-maker in the FTX Empire: SBF was fully aware that Alameda was obtaining funds from FTX clients and had almost unlimited credit on cryptocurrency exchanges. Despite publicly distancing himself from Alameda and claiming not to manage the company, Ellison stated that SBF guided her on how to handle Alameda’s FTT token holdings, its venture capital, and other important business decisions.
She said, “I sent the balance sheet as instructed by SBF, making Alameda’s account appear more robust to investors.” She also confirmed that Alameda had obtained funds from FTX for its own investments.
2. SBF has a strong preference for risk and wants to be the President of the United States
According to Ellison’s analysis, Alameda may face hidden dangers from unpaid loans from the crypto lending institution Genesis and potential market downturn in digital assets, which SBF often overlooks her concerns. She pointed out that despite the significant risks this poses to Alameda, he still wants to continue with risky investments worth $3 billion.
She also provided insights into SBF’s ownership of shares in Robinhood worth over $600 million acquired in May 2022. She stated that these shares were paid for by Alameda, but when disclosure of the purchase was required, SBF requested the transfer of ownership to another entity of FTX called Emergent Fidelity, as he did not want any association with Alameda. This purchase once again shows that despite claiming no significant relationship with the company, SBF is still connected to Alameda.
She also stated that SBF’s ambition is to become the President of the United States, and he is “very interested” in politics and talks about wanting to use his own money to exert political influence.
3. FTX and Alameda were initially operated by the same team
Ellison stated that FTX and Alameda were initially operated by the same team. At the inception of FTX, it was difficult for cryptocurrency exchanges to obtain bank accounts, so Alameda received funds from FTX clients in its bank account. This arrangement continued until 2022, when FTX clients were transferred to FTX’s separate bank account.
Alameda also provided personal loans to SBF, co-founder of FTX Gary Wang, and former Director of Engineering Nishad Singh, with a total amount exceeding $5 billion by mid-2022.
SBF announced in a tweet in January 2022 that FTX launched a $2 billion risk fund, but in reality, the fund is controlled by Alameda. SBF believed that “Alameda’s brand is not that good,” which is why he named the fund FTX.
Before the collapse of FTX and Alameda, SBF and Ellison publicly stated that the two companies were completely independent and that Alameda had no special privileges with FTX.
She also testified that “any significant decision” of Alameda was always made by SBF.
4. Annual salary of $200,000, year-end bonus of $20 million, romantic relationship with ex-boyfriend, also a superior-subordinate relationship
Ellison also mentioned the romantic relationship with SBF. She talked about the difficulties of reporting directly to her boyfriend and pointed out that SBF could fire her at any time. She said, “Throughout our time dating, he was also my boss at work, which led to some awkward situations,” and added that SBF often appeared nonchalant and did not give her enough attention.
But this ex-boyfriend offered her a lucrative salary: an annual salary of $200,000 and a bonus of $20 million in 2021.
LianGuai will continue to track and report on the SBF case.
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