Caroline Ellison: SBF Called the Shots in Alameda, FTX Fraud

• Former Alameda Research CEO Caroline Ellison has taken the stand as the trial of Sam Bankman-Fried (SBF) enters its second week.
• Ellison claims the disgraced FTX founder pulled the strings in alleged crimes perpetrated at the exchange.
• Ellison’s testimony points to the misappropriation of customer funds and investor fraud.

The second week of Sam Bankman-Fried’s (SBF’s) trial has started with a bang. Former Alameda Research CEO and Bankman-Fried lover Caroline Ellison has taken the stand following explosive testimonies from FTX co-founder Gary Wang that revealed the blurred lines between FTX and Alameda. 

In what is a teaser of things to come, Ellison, like Wang, has pointed to the disgraced FTX founder as the mastermind behind alleged crimes committed at FTX and Alameda. Her testimony so far sheds light on the misappropriation of FTX customer funds and investor fraud.

Ellison Points to SBF as the Mastermind in Funds Misappropriation

On Tuesday, October 10, Ellison took the stand in the trial of disgraced crypto kingpin Sam Bankman-Fried. Widely regarded as the star witness for the prosecution, Ellison wasted no time in calling out Bankman-Fried as the orchestrator of the alleged fraud conducted at FTX and Alameda.

According to Ellison, Alameda siphoned up to $14 billion in FTX customer funds for several purposes, including loan repayments and investments, all at the behest of Bankman-Fried. 

"He set up the systems and told us to take the money," the former Alameda CEO reportedly noted.

Ellison corroborated testimony from Wang, disclosing that Alameda had a significant line of credit on FTX. But while Wang put the line of credit at around $65 billion, the former Alameda CEO asserted that she was unaware of the limit. She also testified that FTX did not disclose the line of credit given to Alameda to auditors or investors.

Investor Fraud

Ellison asserted that she had raised concerns that Alameda’s use of FTX customer funds would pose an issue during audits as far back as 2020 before she assumed the role of co-CEO. However, according to the former Alameda executive, Bankman-Fried dismissed her concerns, suggesting auditors would not find out.

In addition to hiding Alameda’s line of credit on FTX, Ellison testified that Alameda defrauded lenders by sending them doctored balance sheets to boost appeal. She noted that it was also why the defendant instructed her to add illiquid FTT tokens to Alameda’s balance sheet. 

"I thought it was misleading," Ellison asserted while admitting to complying with Bankman-Fried's request.

According to the former Alameda chief, things mostly stayed the same after she assumed the CEO role, as she still ran everything by Bankman-Fried.

“He could fire me,” Ellison claimed as she suggested that the defendant’s departure from Alameda’s leadership ranks was just for optics.

On the Flipside

• In opening statements, Bankman-Fried’s lawyers attempted to pin FTX’s collapse on Ellison’s poor risk controls.
• Ellison took a plea deal in December 2022.

Why This Matters

Millions of everyday people lost money in the FTX collapse. As one of the persons closest to the events leading up to the exchange’s collapse, Ellison’s testimony will likely play a significant role in informing the jury of whether or not Bankman-Fried’s actions during this period amounted to fraud.

Read this to learn more about the first week of the SBF trial:

Unpacking the SBF Trial, Highlights from the First Week

Find out more about Friend.tech’s response to the recent spate of SIM swap attacks:

Friend.tech Bolsters Security Against SIM Swap Exploits