Former Alameda Research CEO Caroline Ellison continued her powerful testimony against FTX founder Sam Bankman-Fried in Manhattan Federal Court on Tuesday.
During his time on the witness stand, Ellison painted Bankman-Fried as a “very ambitious” risk taker willing to put clients’ funds on the line for his own ideals.
Bankman-Fried’s ex-girlfriend recalled that Bankman-Fried mentioned that he would be willing to flip a coin if one side had the option to destroy the world as long as the other could make “the world twice as good.”
Ellison further recalled that Bankman-Fried said there was “a 5 percent chance that he would become the president of the United States.”
Bankman-Fried asked Ellison to “borrow” clients’ funds
Ellison alleged that Bankman-Fried directed him to “borrow” funds from FTX clients and distribute them to Alameda Research while the firm struggled to obtain loans.
“(Bankman-Fried) said FTX would be a good source of value,” Ellison said.
When FTT, FTX’s main digital token, was created in 2019, Alameda’s desperate loan situation improved when he became the main holder of the coin. From there, Bankman-Fried “directed” Ellison to include FTT on Alameda Research’s balance sheet to obtain more loans, while the company would intentionally buy FTT to keep its value afloat.
Ellison noted that it was “a bit misleading to put it on the balance sheet because they couldn’t sell it for that much”.
“We’ve tended to be very careful not to talk about it openly,” Ellison commented.
In one instance, Ellison recalled a situation in which Bankman-Fried got upset with her for not being more careful when discussing Alameda Research’s fraudulent relationship with FTT at FTX’s Hong Kong office. Ellison said Bankman-Fried told her “to keep these conversations between us.”
Ellison: “Ultimately, I would always defer to Sam”
Starting out as a crypto hedge fund trader, Bankman-Fried asked Ellison to become co-CEO of the company in 2021. However, Ellison often felt overwhelmed, stating that she “didn’t have that much experience.”
“Ultimately, I would always send Sam,” he said.
Complicating matters, Bankman-Fried began a sexual relationship with Ellison in 2018. By 2020, the two were dating. However, they broke up in 2021 before getting back together later in the year.
Ellison noted that she often “wanted more” in her relationship with Bankman-Fried, calling him “distant” and feeling that he was not “paying attention” to her. Ellison also alleged that Bankman-Fried wanted to keep their relationship relatively secret. These feelings ultimately contributed to their final breakup in 2022.
Meanwhile, Ellison was concerned about Alameda Research’s use of FTX client funds, calling it “a risk.”
“FTX was marketed as a safe, reliable and highly regulated exchange,” said Alameda’s former CEO, “I wouldn’t feel safe leaving a lot of money there…”
Alameda’s unlimited line of credit, Robinhood stock bought with customer funds: ‘It didn’t feel right’
When he asked whether an audit Bankman-Fried requested to attract investors would uncover Alameda Research’s apparently “unlimited” line of credit, the FTX founder assured him otherwise.
“No, don’t worry, the auditors won’t look at this,” Bankman-Fried allegedly remarked.
According to Ellison, Bankman-Fried used these client funds for a series of political donations, noting that she could give a “relatively small amount” for “influence and recognition.” Equally important, the now-disgraced founder of FTX used those funds for a $2 billion venture investment, FTX Ventures.
Similarly, Bankman-Fried bought nearly $650 million in Robinhood Markets stock, fully paid for by Alameda Research. However, Bankman-Fried moved the shares to a separate account in order to avoid disclosing them to the public.
“I didn’t feel good,” Ellison said.
Ellison currently faces up to 110 years in prison on seven separate fraud charges, all of which he has pleaded guilty to. She is testifying under a cooperation agreement with the US government in hopes of a reduced sentence and is expected to return to the witness stand tomorrow.
It is not yet clear whether Bankman-Fried will testify in her own defense.
Cryptonews.com Reporter Julia Smith he is in court and will report daily on the proceedings.