Caroline Ellison Says She and Sam Bankman-Fried Lied for Years

During the second day of her testimony at the trial of FTX founder Sam Bankman-Fried, Caroline Ellison, his former top executive for his crypto hedge fund, made some startling revelations. She admitted to misleading lenders and circulating phony financial documents at Bankman-Fried’s request. Her testimony shed light on the dubious financial practices that took place at FTX and Alameda Research.

Ellison revealed that she felt relieved when FTX collapsed, as she no longer had to engage in deceptive activities. In an emotional court appearance in Manhattan, she squarely blamed Bankman-Fried for encouraging unethical and illegal behavior.

She recounted how Bankman-Fried justified his actions by claiming that he aimed to do the greatest good for the most people, sometimes requiring the disregard of basic principles like “She testified that his philosophy had gradually made her more inclined to participate in deceitful and illegal activities over time.

This dire situation at FTX, which ultimately filed for bankruptcy in early November, left Ellison with a profound sense of discomfort, especially when the firm couldn’t fulfill customer withdrawals, leading to a cascade of repercussions. She expressed her remorse, particularly for the harm caused to all the affected parties, including customers and lenders.

During her testimony, Ellison also confessed to altering balance sheets to conceal the fact that Alameda had borrowed around $10 billion from FTX customers in June 2022, a period marked by a cryptocurrency market downturn. Some lenders were demanding the return of their funds at the time.

Under Bankman-Fried’s instructions, Ellison resorted to creating multiple sets of balance sheets to obscure unfavorable aspects of Alameda’s operations. While she acknowledged that she never would have contemplated such dishonest practices in the past, her tenure at FTX seemingly desensitized her to the point where she became more comfortable with these actions.

Ellison’s concerns in June 2022 were linked to the dire financial situation they were facing. She feared the repercussions if the truth emerged, particularly that customer withdrawals could not be honored or that their deceptive practices would come to light.

The consequences of these actions became a grim reality when FTX couldn’t meet the sudden surge of customer withdrawals in November. The ensuing financial crisis forced the firm into bankruptcy, attracting the attention of law enforcement agencies and regulators.

Notably, Ellison had pleaded guilty to fraud charges in December, around the time of Bankman-Fried’s arrest and extradition to the United States from the Bahamas. Currently, she is providing crucial testimony in the case against Bankman-Fried, who is accused of diverting billions of dollars from FTX to Alameda. He allegedly used up to $10 billion in customer deposits to finance luxury real estate acquisitions and make substantial political donations. If convicted of federal fraud and money-laundering charges, Bankman-Fried could face a prison term of over a century.

This trial has shed light on the inner workings of the crypto industry, particularly the ethical and legal dilemmas that individuals like Caroline Ellison faced while working for firms like FTX. The case serves as a significant example of the challenges and controversies within the digital asset space, and it has garnered substantial public and regulatory attention.

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