In the ongoing trial of Sam Bankman-Fried, founder of cryptocurrency exchange FTX, Caroline Ellison, former CEO of Alameda Research, has taken the stand as the prosecution's star witness. Ellison, who pleaded guilty to fraud charges last year, testified that Bankman-Fried instructed her and other employees to defraud FTX customers by channeling billions of dollars to Alameda Research, a sister hedge fund.
During her testimony, Ellison revealed that Bankman-Fried considered raising money from Saudi Crown Prince Mohammed bin Salman to repay FTX customer accounts. She also detailed how Bankman-Fried directed her to create "alternative" balance sheets to hide the true financial state of Alameda from lenders.
Ellison expressed her concerns about the scheme to Bankman-Fried, as well as top executives Gary Wang and Nishad Singh, and they brainstormed ways to make the balance sheet appear more favorable. Eventually, Bankman-Fried chose a balance sheet that omitted $10 billion in borrowed customer money, making it seem like Alameda had enough assets to cover its loans.
Ellison testified that she was constantly worried about the billions of dollars in recalled loans that could only be repaid with money from FTX customers. She stated that she continued with the scheme because Bankman-Fried instructed her to do so.
The trial also revealed that Bankman-Fried had instructed employees to use disappearing messages on the Signal messaging app and to be cautious about written communications due to potential legal exposure. Ellison also testified that Bankman-Fried wanted to see rival exchange Binance face difficulties to increase FTX's market share.
Bankman-Fried faces seven federal charges, including wire fraud, securities fraud, and money laundering, all connected to the collapse of FTX and Alameda. If convicted, he could face a life sentence. Ellison, who started dating Bankman-Fried in 2021 but broke up with him before the financial problems became apparent, admitted that she should have done things differently but emphasized that Bankman-Fried made the investment decisions that put them in a leveraged position.
The trial continues to unfold, shedding light on the alleged fraudulent activities at FTX and Alameda Research.