Caroline Ellison testifies: Sam Bankman-Fried said FTX customer funds would be a ‘good source of capital’

By Stephanie Clifford

Caroline Ellison, Samuel Bankman-Fried’s ex-girlfriend and the ex-CEO of the hedge fund he owned, testified Tuesday in the federal fraud trial against the former head of FTX. Here are some key takeaways from her testimony:

Ellison said she was directed by Bankman-Fried to use customer funds

With her hair worn in loose waves parted in the middle, round wire-frame glasses, and a tomato-soup-colored dress and a gray blazer, Ellison looked comfortable while answering questions but nervous during the breaks in the trial, as she twisted a cap on a water bottle or pulled at her blazer. Ellison, who has pleaded guilty and is testifying against Bankman-Fried in the hopes of getting a lighter sentence, testified about the crimes she said Bankman-Fried had “directed” her to commit, including Alameda spending funds that customers had deposited with FTX. He “said that FTX would be a good source of capital, and he set up the system” that allowed Alameda to borrow from FTX without alerting customers, she said.

“Alameda took several billion” of FTX customers for its own investments and to repay lenders, she said. Bankman-Fried “was the one who set up these systems that allowed us to take” customer funds, and he was the one who oversaw the loans, she testified, adding that he told her to send balance sheets to lenders that incorrectly stated assets and liabilities for Alameda. Her understanding, she said, was that Alameda could take money from FTX for “whatever we needed it for.”

Ellison shared details about her relationship with Bankman-Fried

The two met at Jane Street, a quantitative hedge fund, and Ellison joined Alameda, a crypto hedge fund, as a trader in March 2018, shortly after Bankman-Fried founded the company. Ellison says she quickly discovered “the company was in much worse shape than I realized,” and more than half of Alameda’s staffers quit, she said. Bankman-Fried “apologized and said he hadn’t known how to tell me,” she testified. In fall 2018, they “started sleeping together on and off,” and dated from summer 2020 to summer 2021, then again from fall 2021 to spring 2022, she testified. (Bankman-Fried appointed her CEO in fall 2021.)

“The whole time that we were dating he was also my boss,” she said, and “in our personal relationship there was a general theme that I wanted more from our relationship and often felt like he was distant or not paying attention to me.”

The first time they dated, they kept it secret, she said; the second time, they were living together in the Orchid penthouse with several other executives, and though “Sam agreed that we could make it public,” she said, they still tried to keep it relatively quiet.

According to Ellison, Bankman-Fried thought he might become president

“He thought there was a 5% chance he would become president one day,” Ellison testified. He also had a high risk tolerance, she said: “He would be happy to flip a coin and if it came up tails the world would be destroyed, as long as if it came up heads the world would be twice as good.”

Ellison says SBF thought “small” political donations—like $10 million—gave him outsized influence

Ellison testified that Bankman-Fried felt political donations were “very effective, that you could get very high returns in terms of influence,” as when Bankman-Fried donated $10 million to Joe Biden, which Ellison characterized as a “small amount.”


Bankman-Fried appeared attentive to details—even when the details were in the weeds

As his lawyer questioned Gary Wang, the cofounder of Alameda and FTX, who finished his testimony before Ellison began, Bankman-Fried frequently interrupted the questioning with whispers to the lawyer, Christian Everdell. It was unclear, of course, what Bankman-Fried was saying, but the whispers came during Everdell’s questions about minute details of documents, like FTX statistics or a blog post. It made me wonder how much of Everdell’s questioning on cross-examination was meant for a larger audience—the jury or the judge—and how much was to satisfy his seemingly difficult client, Bankman-Fried.

Other than the whispers, Bankman-Fried continued with the same defensive-offensive postures he’s been using the whole trial (defensive, hands on his air-gapped laptop, gaze at the screen; offensive, arms resting on armrests, turned attentively toward his lawyer). There was one exception today—as Ellison reviewed a spreadsheet where she had laid out how overleveraged Alameda was, and how much it had borrowed from FTX customers, Bankman-Fried let his hand drift to his chin. At what appeared to be a whispered reminder from his lawyer, he snapped back to his hands-on-keyboard defensive stance.

It’s unclear if anyone at FTX and Alameda was keeping track of money

Wang testified about receiving loans in astounding amounts—more than $200 million in all—from Alameda, and having little idea of what they were for. While $200,000 was for a house he bought in St. Kitts, a Caribbean island, he testified, the rest were generally for venture investments that FTX made. One loan, for $35 million, was “for some investment,” Wang testified. Another, for $54 million? “I don’t recall,” he said. A third, for $2.6 million? He said he remembered an FTX lawyer “telling me it was for some investment in this or that.” When Ellison testified, she seemed to show a similarly cavalier approach to figures, running numbers on Alameda’s assets and liabilities by rounding to the nearest billion.

Lawyers offered an update on the trial length

Ellison is “by far our longest witness,” prosecutor Danielle Sassoon told the judge on Tuesday, saying she expected Ellison’s testimony and cross-examination to last through Wednesday. Prosecutors and defense lawyers also updated the judge on the expected trial length: the prosecution said it could likely rest its case on Oct. 26 or 27, and the defense said it expected its case to take a further week to week and a half.

SBF’s parents paused for the cameras

“I know you guys have a job to do,” Joe Bankman, Bankman-Fried’s father and a onetime FTX adviser, told photographers gathered outside court, putting his arm around Barbara Fried, his partner and Bankman-Fried’s mother. The couple, who have been sued by the FTX bankruptcy estate, have attended the trial since opening arguments. They did not answer questions, but were polite and said “thank you” to the photographers.

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