<\/p>\n
The prosecution\u2019s star witness Caroline Ellison took to the stand as the criminal trial of FTX founder and former CEO Sam Bankman-Fried entered its second week.<\/p>\n
It\u2019s the first time the on-and-off girlfriend of Bankman-Fried and the former co-CEO of his crypto hedge fund Alameda Research will provide her side of the story on what happened in the lead up to the collapse of both FTX and its sister company Alameda.<\/p>\n
Though Ellison was a key member of Bankman-Fried\u2019s inner circle and lived with him and other executives in a $40 million apartment<\/a> in the exclusive luxury residence of Albany in the Bahamas, she maintained a relatively low profile up until the exchange\u2019s collapse. Most of the details about Ellison come from publicly available information, including her Good Reads<\/a> and Tumblr profiles<\/a>, as well as an emergency all-hands speech<\/a> given to Alameda Research employees on Nov. 9, 2022 where she said Bankman-Fried made the decision to use customer deposits to repay creditors.\u00a0<\/p>\n In Ellison\u2019s testimony, she estimates that Alameda ultimately took around $14 billion from FTX customers to repay lenders, according to a live blog<\/a> of the trial from court reporting organization Inner City Press.<\/p>\n \u201cHow did you defraud Alameda\u2019s lenders?\u201d asked assistant U.S. attorney Danielle Sassoon<\/a>. \u201cI sent balance sheets that made Alameda look less risky than it was,\u201d Ellison said.<\/p>\n Alongside FTX executives Gary Wang and Nishad Singh, Ellison pleaded<\/a> guilty to criminal charges including defrauding FTX customers and investors. The three former executives have been cooperating with the prosecution and Wang\u2019s testimony preceded<\/a> Ellison\u2019s in the trial.<\/p>\n Bankman-Fried returned to jail pre-trial in August after leaking<\/a> Ellison\u2019s private diaries to the media, which the prosecution said was a form of witness intimidation.<\/p>\n Unlike Wang and Singh, Ellison only received a very small equity stake in FTX of 0.5% and no equity stake in Alameda Research despite being appointed<\/a> as a co-CEO alongside Sam Trabucco in 2021.<\/p>\n \u201cDid you feel qualified?\u201d asked the prosecution. \u201cNot really but Sam said I should do it,\u201d Ellison said. \u201cI checked everything with him. He was the person I reported to. He could fire me.\u201d<\/p>\n Ellison\u2019s testimony provided insight into trading operations at Alameda Research, which was once considered one of the best trading firms in the crypto industry.\u00a0<\/p>\n \u201cWe also had a line of credit on FTX \u2014 we could withdraw coins even if we didn\u2019t have them,\u201d said Ellison, adding that she didn\u2019t know the size of the line of credit.<\/p>\n \u201cIf a coin was trading for higher on Binance, we could withdraw from FTX and sell there,\u201d she said, explaining the firm\u2019s strategies.<\/p>\n Bankman-Fried was particularly secretive about the strategy for FTX\u2019s native token FTT and would get upset when it was discussed with other traders, Ellison said. Alameda was under Bankman-Fried\u2019s directive to never let FTT fall below $1, she said. At its peak, FTT traded around $84 and fell over 98% to $0.77 when the exchange collapsed, according to data from Coingecko<\/a>.<\/p>\n FTT was included on Alameda Research\u2019s balance sheet to get loans from the now bankrupt crypto lender Genesis, Ellison said. Its inclusion artificially boosted the value of the trading firm as most of FTT\u2019s value came from Alameda\u2019s trading and was relatively illiquid.<\/p>\n \u201cI thought it was misleading,\u201d said Ellison referring to FTT\u2019s inclusion.<\/p>\n Some customer funds taken from the trading firm were also used as loans for employees including Ellison. She described withdrawing US$2 million for her own donor-advised fund and a US$100,000 loan to her parents.<\/p>\n There was also \u201cone loan of $3.5 million for a gambling company people at FTX wanted to put in my name since I wasn\u2019t on the books of FTX,\u201d Ellison said.<\/p>\n \u201cMoney also went to political contributions. Ryan Salame got a $35 million loan,\u201d she continued. \u201cSam gave $10 million to Biden, he thought it bought him access.\u201d<\/p>\nAlameda\u2019s secret sauce<\/strong><\/h2>\n
Political ambitions<\/strong><\/h2>\n