Caroline Ellison blames Sam Bankman-Fried for misuse of FTX user funds at trial

Reports have suggested the former CEO of Alameda Research and SBF had largely been out of contact following the collapse of FTX in November 2022.

Former FTX CEO Sam “SBF” Bankman-Fried watched from the defense table as his former business associate and girlfriend, Caroline Ellison, testified at his criminal trial.

According to reports from the courtroom on Oct. 10, Ellison admitted to fraud during her time at Alameda under Bankman-Fried’s direction. The former Alameda CEO reportedly placed the blame for misuse of FTX user funds directly on SBF, claiming he “set up the systems” leading to Alameda taking roughly $14 billion from the exchange.

“Alameda took several billions of dollars from FTX customers and used it for investments,” said Ellison, according to reports. “I sent balance sheets that made Alameda look less risky than it was.”

Ellison met Bankman-Fried through their jobs at Jane Street Capital, with SBF convincing her to leave the investment firm and join his crypto-focused endeavors. Reports have suggested the two had largely been out of contact following the collapse of FTX in November 2022.

Sam Bankman-Fried included this photo with Caroline Ellison in a document he sent me, noting that she “was wicked smart,” but “deeply insecure.” CAROLINE TESTIFIES AGAINST SBF IN COURT THIS WEEK. pic.twitter.com/n9WXyBXfd1

— Tiffany Fong (@TiffanyFong_) October 10, 2023

Ellison’s relationship with SBF is one of the issues central to the allegations facing the former CEO, as he was in charge of the crypto exchange while she led the team at Alameda. Bankman-Fried’s fraud charges are based on his directing Alameda to access FTX user funds without customers’ consent, which he used for purchases, including property and donations to political campaigns.

FTX co-founder and former chief technology officer Gary Wang took the stand starting on Oct. 5 as one of the first witnesses for prosecutors, claiming he committed crimes with Ellison and former engineering director Nishad Singh. On cross-examination of Wang, SBF’s attorneys seemed to be attempting to shift some of the blame for the exchange’s collapse to Ellison, questioning the former chief technology officer on her role. In opening arguments, the defense claimed she ignored Bankman-Fried’s request to put a hedge on Alameda investments.

Ellison and Wang were some of the first FTX and Alameda insiders to plead guilty as part of an agreement with U.S. authorities for her testimony. It’s unclear whether Bankman-Fried will take the stand as part of his defense strategy.

The former Alameda Research CEO’s testimony marked the fifth day of SBF’s criminal trial, where he faces seven fraud-related charges. He has pleaded not guilty to all charges and is expected to appear in a second criminal trial starting in March 2024.

Magazine: Can you trust crypto exchanges after the collapse of FTX?