On the sixth day of Sam Bankman-Fried’s fraud trial, Caroline Ellison in her testimony revealed that the FTX founder had instructed her to unlawfully divert funds from FTX during last year’s cryptocurrency crash, media reports said.
As the cryptocurrency market experienced a downturn in May 2022, Ellison expressed concerns about the potential collapse of Alameda Research, the hedge fund linked to FTX. The crash left Alameda in a precarious position, facing calls from lenders with open-term loans. Ellison testified that during an in-person conversation in August 2022, Bankman-Fried acknowledged the financial vulnerability of Alameda and blamed her for the situation. He allegedly directed her to use FTX customer funds to repay loans without informing the customers.
According to Ellison, Bankman-Fried insisted on using FTX’s money to cover the fund shortfall, despite knowing that Alameda lacked the necessary funds. She recounted that he continued to instruct her to repay loans, emphasizing the use of FTX customer funds for this purpose.
In response to questions from the prosecution, Ellison revealed Bankman-Fried’s philosophical stance on rules, stating that he identified as a utilitarian and believed traditional ethical rules like ‘don’t lie’ and ‘don’t steal’ were flawed under utilitarianism. Ellison claimed that this perspective influenced her own behavior, making her more willing to engage in dishonest practices over time.
She reflected on the impact of Bankman-Fried’s philosophy, admitting that she became more open to actions such as lying on balance sheets and misappropriating funds from customers, actions she would not have believed herself capable of when she initially joined Alameda.
