Caroline Ellison, SBF ex-girlfriend, helped put FTX founder in jail

In sentencing FTX founder Sam Bankman-Fried to a 25-year jail sentence on Thursday, Decide Lewis Kaplan cited testimony from Caroline Ellison, an ex-girlfriend of the defendant and early recruit into his crypto enterprise.

“I keep coming back to Ms. Ellison’s testimony that he knew it was wrong,” Kaplan mentioned on the sentencing listening to in downtown Manhattan. “He knew it was criminal.”

Ellison was the star witness for the Division of Justice in its prosecution of Bankman-Fried. She agreed to a plea deal in December 2022, a month after FTX spiraled into chapter 11.

As a part of her testimony on the legal trial late final 12 months, Ellison equipped the federal government and the jury with textual content messages, paperwork and secret recordings that in the end helped result in Bankman-Fried’s conviction on all seven expenses in opposition to him.

Manhattan U.S. Lawyer Damian Williams mentioned in a press release after the sentencing on Thursday that Bankman-Fried’s “deliberate and ongoing lies demonstrated a brazen disregard for his customers’ expectations and disrespect for the rule of law, all so that he could secretly use his customers’ money to expand his own power and influence.”

Ellison, who ran FTX’s sister hedge fund Alameda Analysis, pleaded responsible to 2 counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit cash laundering.

Although Ellison faces comparable sentencing pointers to Bankman-Fried, she’s anticipated to obtain a much more lenient sentence as a consequence of her function as a cooperating witness.

Ellison spent years as Bankman-Fried’s on-again, off-again girlfriend and, at instances, his roommate. She adopted Bankman-Fried from California to Hong Kong and in the end to the Bahamas, as Bankman-Fried repeatedly shifted headquarters for his crypto firms.

Michael Lewis wrote about Ellison in his ebook, “Going Infinite,” which coated Bankman-Fried’s rise and fall. In 2021, Ellison was promoted to CEO of Alameda, a job for which, in keeping with Lewis’s reporting, neither Ellison nor Bankman-Fried discovered her significantly nicely suited.

“Caroline sensed that, even as Sam promoted her to CEO of Alameda Research, he disapproved of her job performance — and she shared his opinion,” Lewis wrote.

Lewis shared an excerpt from one of many memos that Ellison had despatched Bankman-Fried. “It feels like I’m doing a much worse job managing Alameda than you would if you were working on it full-time,” she wrote.

In April 2021, Ellison tweeted about “regular amphetamine use” in a thread that additionally talked in regards to the “herculean” effort it took for her to get off of her sofa and go for a hike.  

Courtroom filings present that Ellison’s compensation paled compared to different prime executives. Of the $3.2 billion in payouts to the alternate’s founders and different senior workers, FTX’s head of engineering, Nishad Singh, acquired $587 million, co-founder Gary Wang obtained $246 million and $2.2 billion went to Bankman-Fried. Ellison acquired $6 million.

A few of Ellison’s non-public diary entries had been leaked by Bankman-Fried to The New York Instances, which printed a report about them final July, months earlier than the trial. The act ultimately landed Bankman-Fried back in jail after Kaplan revoked his bail for alleged witness tampering.

In a Google doc from February 2022 shared with the Instances, Ellison wrote, “I have been feeling pretty unhappy and overwhelmed with my job. … At the end of the day I can’t wait to go home and turn off my phone and have a drink and get away from it all.”

She added, “It doesn’t really feel like there’s an end in sight.”

In mid-2021, when FTX purchased fairness within the firm again from rival alternate and early investor Binance, FTX used $1 billion in buyer funds for the transaction, Ellison testified.

Ellison mentioned she thought-about resigning from Alameda at numerous factors from 2019 to November 2022.

On considered one of her Google Docs, Ellison had a piece entitled “limiting factors in scaling,” which she mentioned referred to issues that had been holding again Alameda. The very first thing she listed was administration, together with a touch upon her former co-CEO Sam Trabucco.

“I feel like neither Trabucco nor I has been doing a great job of pushing on stuff,” she wrote. “We’re in the mode of maintaining status quo and trying to fix problems.”

By way of the commingling of operations between FTX and Alameda, Ellison admitted on the witness stand that the 2 corporations did not have a correct “Chinese wall” separating the companies.

Throughout her testimony, Ellison largely prevented eye contact with Bankman-Fried, staring down at her arms between questions and continuously flipping her hair over her left shoulder. Bankman-Fried additionally typically seemed away, with arms clenched.

Ellison advised the jury that her breakup with Bankman-Fried within the spring of 2022 affected communications between the 2 of them. They might speak largely over Sign regardless of residing in the identical residence, they usually largely prevented one another outdoors of labor.

Danielle Sassoon, the assistant U.S. legal professional representing the federal government, advised Kaplan a number of instances “the defendant has laughed, visibly shaken his head, and scoffed,” which she mentioned could possibly be having an impact on Ellison “given the history of this relationship, the prior attempts to intimidate her, the power dynamic, their romantic relationship.”

The next day, Ellison once more seemed to the group for steering about how you can deal with an all-hands meeting for Alameda’s roughly 30 workers.

Ellison’s proposal was to inform them, “Alameda is probably going to wind down” and that there was “no pressure” to remain however assist with “stuff like making sure our lenders get paid” can be “super appreciated.”

Bankman-Fried prompt she say one thing about there “being a future of some sort for those who are excited.”

Ellison ended up divulging much more than that within the workers assembly, a secret recording of which was performed for the jury.

“Alameda borrowed a bunch of money,” which it used to make investments, Ellison mentioned on the assembly. However as crypto costs fell, “FTX had a shortfall of user funds” after which “users started withdrawing their funds” they usually “realized they would not be able to continue.”

When she was requested by a staffer whose concept it was to plug Alameda’s mortgage losses with FTX buyer cash, she mentioned, “Um, Sam, I guess,” and giggled.

“FTX basically always allowed Alameda to, like, borrow user funds, as far as I know,” Ellison mentioned.