Ex-Alameda CEO Ellison Emerges as Central Figure at Bankman-Fried Trial

Caroline Ellison, the former chief executive officer of Alameda Research and Sam Bankman-Fried’s former girlfriend, quickly became the focal point of the FTX founder’s fraud trial in New York.

(Bloomberg) — Caroline Ellison, the former chief executive officer of Alameda Research and Sam Bankman-Fried’s former girlfriend, quickly became the focal point of the FTX founder’s fraud trial in New York.

Prosecutors said Bankman-Fried told her and his closest friends the truth about taking customer funds, even as he “lied to the world” about the safety of his crypto platform. Defense lawyers, meanwhile, said Bankman-Fried relied on Ellison to run Alameda and when he asked her to hedge Alameda amid market uncertainty last year, she didn’t do it.

Opening statements Tuesday hinted at the strategy both sides will use to sway the jury in the historic trial, including relying on the involvement of Bankman-Fried’s inner circle in the FTX collapse. Ellison is expected to testify as the government’s star witness, after reaching a cooperation agreement along with two other executives.

Nathan Rehn, an assistant US attorney, on the first day of the fraud trial painted Bankman-Fried, 31, as a calculated criminal who used investor deposits at FTX as a personal bank account before the company collapsed into bankruptcy a year ago. He pulled money out of FTX to cover his loans, filed false financial statements and testified to Congress, untruthfully, that FTX wasn’t using customer money. 

The truth was “a secret he only shared with a few members of his inner circle, his girlfriend and some of his closest friends,” Rehn said.

The case, which the government has labeled one of the biggest financial crimes in the country’s history, will explore how Bankman-Fried, an awkward 20-something from California, came to run and allegedly ruin one of the largest crypto exchanges in the world. The MIT graduate faces a maximum prison term of 20 years for each of the five most serious charges against him.

Alameda played a key role in the collapse of FTX. Prosecutors say Bankman-Fried allowed Alameda to borrow limitless amounts from FTX and use it for trading and other activities, including political donations. FTX became a household word, paying celebrities like Tom Brady and Steph Curry to star in advertisements. His father, Joseph Bankman, appeared in a now-infamous Super Bowl commercial with Larry David.

Bankman-Fried “had wealth, he had power, he had influence, but all of that was built on lies,” Rehn told jurors. “He was committing a massive fraud, and taking billions of dollars from thousands of victims.”

Bankman-Fried was expressionless as Rehn spoke, but briefly looked at the jury as the government lawyer emphasized “billions” of fraud, before turning back to stare at his laptop. The former crypto executive’s parents, a pair of Stanford University law professors, sat in the gallery behind their son.

When it was their turn, Bankman-Fried’s lawyers blamed Alameda for the ultimate shortfall of customer funds. Mark Cohen, Bankman-Fried’s lawyer, said that in the months leading up to FTX’s bankruptcy filing in November, he became concerned about dramatic fluctuations in crypto prices and urged Ellison to hedge their exposure to further losses, but she didn’t do it.

“Sam acted in good faith and took reasonable business measures,” Cohen said, adding that he “believed they had assets to weather the storm.”

‘Rise and Fall’

Cohen said that the “rise and fall” of FTX, mirrored the wider crypto industry, which was battered by fast changing market conditions in 2022. 

“The case in many ways is about crypto from 2017 to 2022,” Cohen said. “You will learn that crypto is not for everyone,” and added that “it’s not a crime to run a company that ends up going through a storm.”

Cohen said the turmoil in the industry was magnified when the head of Binance, a major competitor, put out a tweet that attacked FTX, which triggered a run on the company’s deposits.

“In the face of the liquidity crisis, Sam didn’t run away and attempted to stabilize the company and repay customers,” Cohen said.

Bankman-Fried is accused of taking customer funds from FTX and using it to engage in speculative trading through Alameda. Cohen said their client had “reasonably believed” that loans sought by Alameda were permitted and backed by collateral.

Read more: The Key Players at Sam Bankman-Fried’s Historic Fraud Trial

In addition to Ellison, other FTX executives are expected to testify against their former boss. Gary Wang, former FTX chief technology officer and Nishad Singh, FTX’s former engineering director, are also expected to take the stand as cooperating witnesses after pleading guilty to fraud charges.

Rehn emphasized that evidence of Bankman-Fried’s misleading statements could be found in the company’s terms of service as well as old tweets ensuring customers that their money was safeguarded.

Rehn said that FTX told customers that the money belonged to them, not the company. “FTX’s advertising slogan was about how customers could trust it,” he said.

He made reference to a Bankman-Fried’s tweet – “FTX has a long history of safeguarding assets and that remains true today.”

“Statements about FTX keeping customer money safe were lies,” Rehn said.


Among the two government witnesses Wednesday was Adam Yedidia, a former FTX developer and college friend of Bankman-Fried. He lived in the Bahamas in 2021 and 2022 with nine other people, including Bankman-Fried in a $35 million penthouse. 

He said he quit FTX the week of its bankruptcy, after learning that customer funds were misused.

“As a developer at FTX, I may have unwittingly written code that contributed to a crime,” said Yedidia, who was given immunity in exchange for testifying.

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(Adds witness testimony in 24th paragraph.)

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