Caroline Ellison, former chief executive officer of Alameda Research LLC, center, arrives at court in New York, US, on Tuesday, Oct. 10, 2023.
Yuki Iwamura | Bloomberg | Getty Images
Caroline Ellison, the former head of Sam Bankman-Fried’s crypto hedge fund and the government’s star witness in the criminal fraud case against the FTX founder, testified on Tuesday that she and her ex-boss defrauded customers, investors and lenders.
“Yes, we did,” Ellison said, when Danielle Sassoon, assistant U.S. attorney, asked if she committed a crime. “I mean Sam and I and others.”
From a courthouse in downtown Manhattan, Ellison then listed her crimes: “fraud, conspiracy to commit fraud, and money laundering.”
Ellison, who ran Alameda Research, pleaded guilty in December to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering. Part of the 28-year-old’s plea deal with the government has involved cooperating with the prosecution’s case against Bankman-Fried.
Ellison’s testimony started at 12:37 p.m. and lasted less than 10 minutes before the court broke for lunch. It will resume at about 2 p.m.
Donning a red dress with a loose gray blazer and glasses, Ellison provided a brief background of how she got to know Bankman-Fried. They met when she was an intern at Jane Street, a proprietary trading firm in New York. They later worked together at Alameda and dated for a couple years, she said.
Ellison was one of Bankman-Fried’s earliest recruits to Alameda in 2017. Bankman-Fried had reportedly convinced the Stanford grad to ditch her job at Jane Capital to join Alameda as a trader, when the hedge fund was still in its original office in the San Francisco Bay area.
When asked by Sassoon to identify the defendant, Ellison stood up and, for almost 30 seconds, looked around the room. She turned her head all the way to the left to the jury box and back to the right again multiple times before finally identifying Bankman-Fried as sitting “over there and wearing a suit.” Bankman-Fried, who was known for his floppy hair and beach shorts, got a fresh haircut prior to the trial, reportedly from a fellow inmate at the jail in Brooklyn where he’s been held since August.
Ellison said Bankman-Fried was the original CEO and the owner of Alameda.
“Sam directed me to commit these crimes,” she said. He “directed us to take customer money to pay loans.”
Bankman-Fried, 31, faces seven federal charges, including wire fraud, securities fraud and money laundering, all tied to the collapse of FTX and Alameda late last year. If convicted in the trial that began a week ago, Bankman-Fried could spend his life in prison. He’s pleaded not guilty.
Central to the case against Bankman-Fried is the billions of dollars that flowed from customer accounts at FTX to Alameda, which had a massive hole in its balance sheet after the crypto markets turned in 2022.
Ellison said Alameda took several billion dollars from FTX customers and that Bankman-Fried had not only set up a system to steal the funds but also directed Ellison and others to use customer funds to repay loans in the ballpark of $10 billion.
“We ultimately took around $14 billion, some of which we were able to pay back,” she said. “I sent balance sheets to lenders at the direction of Sam that incorrectly stated Alameda’s assets and liabilities.”
She said the numbers were adjusted to make Alameda look less risky as an investment.
WATCH: Caroline Ellison testifies Sam Bankman-Fried directed her to commit crimes
