Caroline Ellison, former head of Sam Bankman-Fried’s crypto hedge fund and key witness in the criminal fraud case against the FTX founder, testified on Tuesday that she and Bankman-Fried engaged in fraudulent activities, deceiving customers, investors, and lenders.
Testifying in a Manhattan courthouse, Ellison admitted to committing crimes such as fraud, conspiracy to commit fraud, and money laundering, media reports said.
Ellison, previously in charge of Alameda Research, had pleaded guilty in December to charges including wire fraud, conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud, and conspiracy to commit money laundering. As part of her plea deal, she agreed to cooperate with the prosecution’s case against Bankman-Fried.
During her brief testimony, Ellison, donning a red dress and a gray blazer, outlined her association with Bankman-Fried. They first met when she interned at Jane Street, a New York trading firm. Later, they worked together at Alameda, and they were also romantically involved for a couple of years.
Ellison, one of Alameda’s earliest recruits in 2017, stated that Bankman-Fried directed her to commit crimes, including taking customer money to pay off loans. Bankman-Fried, who faces seven federal charges, including wire fraud, securities fraud, and money laundering, allegedly played a central role in the collapse of FTX and Alameda late last year.
The trial, which commenced a week ago, could lead to a life sentence for Bankman-Fried if convicted. A significant aspect of the case revolves around the flow of billions of dollars from FTX customer accounts to Alameda.
Ellison disclosed that Alameda took several billion dollars from FTX customers and that Bankman-Fried not only orchestrated a system to misappropriate funds but also instructed her and others to utilize customer funds to repay loans, amounting to approximately $10 billion.
Ellison revealed, “We ultimately took around $14 billion, some of which we were able to pay back,” emphasizing that she sent manipulated balance sheets to lenders, following Bankman-Fried’s directives, to present Alameda as a less risky investment.
The trial will continue with further testimony, exploring the intricate details of the alleged fraudulent activities orchestrated by Bankman-Fried and his associates.
