The ongoing trial of Sam Bankman-Fried, the former CEO of Alameda Research, has seen emotional testimony from Caroline Ellison, a key witness and Bankman-Fried’s former girlfriend. Ellison disclosed details of fraud within the crypto empire and the relief she felt when the fraudulent activities were exposed.
The trial includes revelations about deceptive balance sheets, misusing customer funds, bribery attempts, and questionable financial practices.
Caroline Ellison’s Testimony Highlights
Caroline Ellison testified that she felt a sense of relief when the fraud within their crypto empire began to unravel. She expressed remorse for lying to investors and the public. During her testimony, she recalled a particularly difficult text message exchange with Sam Bankman-Fried and wept in the courtroom.
Moreover, Ellison revealed that the collapse of Bankman-Fried’s companies was triggered by a deceptive balance sheet. The balance sheet was intended to mislead lenders into thinking that Alameda was financially stable, but it contained concerning data, including FTX’s FTT token and related assets that raised questions about the companies’ viability.
Fyrther, Ellison disclosed that Bankman-Fried instructed her to use FTX customer funds to repay Alameda’s lenders, even though she recognized the risk involved. The use of customer funds to repay debts raised concerns about the stability of both Alameda and FTX.
In a surprising revelation, Ellison mentioned a bribery attempt involving Chinese officials to unlock locked funds. This incident illustrated the trust Bankman-Fried had in her. The bribery was not related to the charges against Bankman-Fried but served to highlight their financial and ethical practices.
Inside the Trial: Revelations about Sam Bankman-Fried Unconventional Tactics
Bankman-Fried’s response to mounting debts included considering selling FTX shares to Saudi Arabian Prince Mohammed Bin Salman. This strategy was part of their efforts to raise capital and repay lenders.
Ellison testified that Bankman-Fried had a worldview where rules like “don’t lie” and “don’t steal” did not fit. She described becoming accustomed to dishonesty and sending false information to business partners and misusing customer funds over time.
To avoid legal issues, Ellison used vague language in internal documents, masking the fact that Alameda had borrowed more than $10 billion from FTX customers by May 2022.
Bankman-Fried had instructed her to avoid explicit language that could lead to legal trouble. Ellison also revealed that Bankman-Fried intentionally maintained a disheveled appearance to project an image of a typical Silicon Valley nerd, focused on coding, and not concerned with luxury. He believed this image was advantageous for business and personal reasons.
During the trial, Judge Lewis Kaplan largely denied multiple defense requests related to crypto-specific regulations, potential recoveries from the FTX bankruptcy, and Bankman-Fried’s charitable giving. The judge stated that these matters were irrelevant and could confuse the jury.