The former girlfriend of Sam Bankman-Fried and her father, Carina Ellison, testified before the jury in the FTX trial

The government’s star witness in the FTX trial has beenCaroline Ellison, the ex-lover of Sam Bankman-Fried and top executive in his crypto business empire.

Bankman-Fried’s cavalier attitude toward lying rubbed off on her, Ellison testified. Ellison began to choke up as she said that if she were told she would be taking customer money or sending false balance sheets, she wouldn’t have believed her. Later, testifying about the days when the crypto hedge fund Alameda Research and exchange FTX fell, she cried.

And as Bankman-Fried’s former girlfriend, she had intimate knowledge of both the company and of the former crypto celebrity who now faces seven criminal charges that could send him to prison for the rest of his life.

Although Bankman-Fried’s lawyers are justifying the transfer of funds as legitimate loans, prosecutors are seeking to paint it as fraud, arguing FTX customer money was used to plug financial holes at Alameda, as well as to make speculative investments, and to finance Bankman-Fried’s lavish lifestyle.

Ellison says he told to “shut the fuck up” when Bankman- Fried ordered the company to pay a bribe over objections from a Chinese employee. The employee on Signal was ridiculed by Bankman-Fried and another executive.

She explained how she handled a lot of decisions in Alameda. “But for any major decisions, I would always run them by Sam, and I would always defer to Sam if he thought that we should do something.”

The power dynamic between her and Bankman-Fried was always difficult, Ellison noted when the prosecution asked why she was so deferential.

Ellison recalled Bankman-Fried’s affection for games of chance — and his tolerance for risk. For example, she remembered how he once talked about being willing to lose $10 million if he drew tails in a coin flip — as long as he had the chance to win more than $10 million if he drew heads.

Ellison made a fairly standard balance sheet after Genesis asked for a look at Alameda’s balances. He asked her to look for other ways of presenting the information. Ellison was able to come up with seven alternatives that made the financials look less risky, some of which he sent one that Bankman-Fried approved to Genesis.

Ellison said that she was stressed and spoke to Bankman-Fried about Alameda’s ability to pay back loans.

At several times during her testimony, Ellison said Bankman-Fried directed her to manipulate spreadsheets to make Alameda’s financial picture look more favorable and to ignore requests from lenders for additional information.

So Ellison created seven different options, and she said Bankman-Fried advised her to send a version that minimized the size of Alameda’s debts, while playing up the worth the firm’s holdings of FTT, a cryptocurrency Bankman-Fried created.

During opening statements, the defense suggested that the failures at Alameda were Ellison’s fault — and that Bankman-Fried acted appropriately given what he knew at the time. In order to prove fraud occurred, the prosecution must show that Bankman-Fried knowingly lied. And Bankman-Fried was cagey about what he put in print. He had the company set their Slack and Signal messages to disappear, resulting in a lot of blank Signal chats in previous court exhibits, and again today.

Bankman- Fried spoke about how he could raise more money from banks and investors as panic overtook FTX, Ellison testified.

She said Bankman-Fried talked about trying to get money from the Crown Prince. The plan, as she detailed it, was to use money from Saudi Arabia to pay back Alameda’s lenders. But that funding never materialized.

As the crypto world began to melt down in mid-2022, lenders started asking for money back from Alameda. Alameda, too, was hurting—affected by the market downturn and also hobbled by its borrowing from FTX.

Ultimately, however, FTX and Alameda collapsed, and in short order, FTX declared bankruptcy and Bankman-Fried was arrested. Days later, Ellison pleaded guilty to several criminal charges and agreed to cooperate with federal prosecutors in their case against Bankman-Fried.

Ultimately, Ellison said, Alameda transferred $100 million in payments to what she understood to be Chinese government officials to unfreeze the account, which could constitute a bribe.

Ellison described a meeting in which a colleague with a father working in China protested frequently. Ellison said Bankman-Fried told the employee to shut up.

Judge Lewis Kaplan, who’s presiding over the trial, allowed the use of that testimony “for limited purposes,” — to demonstrate “the trust and confidence” Ellison and Bankman-Fried had in each other.

Kaplan told the jury that the bribe allegation isn’t one of the charges in the trial. But at a separate trial, expected to take place next year, Bankman-Fried will face charges of bribery and bank fraud.

After prosecutors first called her to the witness stand, everyone stood and faced the two wooden doors at the back of Judge Kaplan’s courtroom. Ellison was taken down the center aisle to the witness stand.

Ellison looked in the room when the prosecution asked her if she could identify Sam Bankman- Fried for the jury. It took almost a minute for her to locate him.

Ellison and Bankman- Fried have been indicted by a U.S government in a scheme to cheat two banks out of their money.

The daughter of M.I.T. economists Ellison studied math and met Bankman-Fried at the trading firm Jane Street. She was an intern while he was a trader.

Ellison told the court that she and Bankman-Fried began sleeping together. In the summer of 2020 we started a romantic relationship.

Alameda CEO Caroline Ellison and the Collapse of the Cryptocurrency Exchange FTX: The Case of Bankman-Fried

Over the course of hours of testimony, she described in detail personal and professional ups and downs, and the conspiracy of which she has admitted to being an integral part.

Last year, as cryptocurrency company FTX and sister trading firm Alameda Research were melting down, Alameda CEO Caroline Ellison held an all-hands meeting and told staff that Alameda had taken customer deposits from FTX and could not pay them back. When asked in the meeting by an employee whose idea it had been to use customer funds, “Sam, I guess” was Ellison’s answer.

Ellison testified on thecollapse of Bankman-Fried’s empire. Though she answered her questions with the attitude of a student trying to get an A in a difficult class, during court sidebars — where the lawyers bickered with each other in front of the judge and out of earshot of the rest of us — she slumped into herself, looking forlorn. She wore a gray blazer over a white v-neck blouse with black dots tucked into a black skirt, and she still didn’t quite summon up the appearance of an executive. That made sense. She made few consequential moves without first talking to Bankman-Fried, according to text messages we saw.

Ellison knew this likely wasn’t possible. FTX customer funds had been used to pay off those loans, she testified. The FTX exchange wouldn’t have money if a large number of customers withdrew all at once. “I was really stressed out,” Ellison said. “I was in sort of a constant state of dread at that point.”

Bankman-Fried’s defense lawyers seem to be teeing up the notion that the customer funds were still there, just in an investment portfolio. The problem is that putting those funds in an investment portfolio is still stealing the funds. Customers don’t have access to customer money on cryptocurrencies exchanges. The honest ones don’t.

Ellison told her that she shouldn’t write anything that would make her want to see the New York Times front page. She violated that rule with a set of memos about their relationship. Later, Bankman-Fried would literally leak them to that paper.

She said that he believed in a proactive approach to public relations. He also thought his famously wild hair was “very valuable” and had led to higher bonuses at Jane Street, she testified. While she said this, Bankman-Fried shook her head. Though Ellison and Bankman-Fried initially had “luxury cars,” Bankman-Fried felt it would be better for his image to drive a Toyota Corolla, so he switched cars.

At least he did really sleep on a bean bag in the office, according to Ellison. This had been thrown into question by Bankman-Fried’s college roommate in earlier testimony.

Because PR was so important to Bankman-Fried, when Bloomberg was preparing a critical — and, it seems, prescient — article about the ties between Alameda and FTX, Bankman-Fried considered shutting Alameda down. Bankman-Fried and Ellison lied to the reporter in order to make the two companies sound different. The money from which the venture fund was coming was used to change the name of the fund to remove the word Alameda.

The move was to make a statement, but Bankman- Fried didn’t want to do it. Ellison wrote an own version of the message Bankman- Fried had written, which started, “Heh, I see someone is really trying to FUD us.”

We saw a remarkable text from Ellison as the collapse was happening. Ellison said the mood was the best he had been in a year. It’s not clear what date the screenshot came from, though Bankman-Fried was the source. Ellison couldn’t stop weeping looking at the messages. “To be clear,” she said, “that was overall the worst week of my life. I had a lot of mood swings that week, and a lot of different feelings.”

One of those feelings was relief. The truth coming out was something she had been thinking about all day. The thing she’d been dreading had happened and “I didn’t have to lie any more.” She said that she had betrayed many people and felt bad about it. A clerk gave the woman a tissue.

The things you write in writing can possibly save you. It’s hard to paint Ellison as the sole decision-maker when there are contemporaneous evidence that she didn’t make a move without Bankman-Fried.

Barbara Fried had a discussion with defense lawyer Christian Everdell after Caroline Ellison stepped down from the stand. Fried had a strong opinion about something and she was gesticulating. Mark Cohen talked to her after Everdell walked off.

The defense was suggesting that Ellison had been coerced into testifying, because she had pleaded guilty to defrauding investors that she could not have been involved in. She did not prepare materials for them. Unfortunately, she did say that she had conversations with investors as part of their due diligence — and, of course, Alameda was taking on losses from FTX to keep FTX’s balance sheet pristine. The line of questioning was waste of time.

Before this case, I had been told that Everdell and Cohen were “workman-like,” which I took to mean that they were unshowy but competent. I now believe that comment was an insult. I have been waiting for a juicy cross-examination, as I live for chaos and drama. I am beginning to think I am not going to get one.

I got a trombone that was sad. In Cohen’s disorganized cross-examination, he mostly bored the jury. Two different jurors appeared to be asleep at one point.

I wondered if there was a rule for cross-examinations. Danielle Sassoon had created an easy to follow narrative by running a direct examination. By contrast, Cohen appeared to be bumbling around, taking up one topic only to abruptly pivot. Cohen had to prepare his lines of questioning all night even though we are in the prosecution’s case.

We established that Bankman-Fried had a much larger appetite for risk than Ellison. I thought perhaps it might be building to something, but this line of questioning was quickly dropped. We found that Ellison avoided it while Bankman-Fried sought it out, and that the two reacted differently to stress. Okay?

An accountant in Alameda: a surprise for the jurors and for Cohen when Ellison confessed to stealing money from FTX

In addition, there were at least two junior accountants hired by 2022, and there was one accountant at Alameda in the year 2021. I was surprised by the problem with accountants in Alameda, as CEOs don’t do the balance sheets for their companies. I was ready to hear more, but then it was dropped.

Several jurors were entertained when one of the sidebars occurred during the cross-examination. There was one in which the prosecution complained that Bankman-Fried was not following Ellison’s answers. I did not have a good look at his face, but I did observe him shaking his head, and occasionally quivering during her testimony.

As we were approaching lunch, several jurors looked annoyed, and Cohen looked clueless. He asked Ellison to describe what buy on the way down meant, as though it were an art form. What it means is to purchase an asset that’s losing value. This seemed to puzzle her. At other times, Cohen seemed to forget what she had testified to, bringing up things she hadn’t said. I don’t think this was an attempt to trap her in a lie or poor preparation, but like Adam Yedidia before her she was fastidious about making sure a question was clear and her answer was precise.

When Sassoon got up for a quick redirect, she demolished any points Cohen had attempted to make. But I didn’t really appreciate her cleverness until after Ellison left the stand, and the jurors left the room. She’d managed to set a neat little trap for Cohen.

On the direct examination, near the end, Sassoon asked about an Alameda all-hands meeting, without bringing up many specifics. During the cross, Cohen asked Ellison what topics were covered in the meeting, while avoiding details. That opened the door for Sasson on redirect to work in that Ellison had confessed to stealing billions of FTX customers’ money, at Bankman-Fried’s direction.

There was a question as to whether jurors would hear the tapes. The argument for bringing in the tapes was set up by testimony. The judge ruled in favor of the jury hearing the recordings and we briefly recessed.

The afternoon was short and brief. Christian Drappi, a handsome funeral director in a black suit and tie who used to work for a software company, testified as to how to set up the tape. When Changpeng Zhao, the CEO of Binance, announced on Twitter that he intended to acquire FTX, Ellison confessed the theft of customer funds to him and a few other employees, Drappi said. A recording of the all-hands was made by an employee who joined the place three days before.

And in a small miracle of pacing, the government got Zac Prince, the founder and former CEO of crypto lender BlockFi, on the stand just long enough to blame FTX’s bankruptcy for BlockFi’s subsequent bankruptcy before we broke for the day.

SBF is on trial for fraud and money laundering, not for bribing Chinese officials, but the most lurid and surprising part of Ellison’s testimony took the jury and gallery on an absurd digression.

Chinese officials froze Alameda’s account as part of their money-laundering investigation into someone else. For the next year, the FTX and Alameda teams made increasingly desperate and risky moves in order to recover the money. This included hiring lawyers, as well as creating accounts in the names of “Thai prostitutes” to execute “trading strategies” to move the money. (Said information about the accounts came from FTX executive Ryan Salame, Ellison testified, which raises some questions of its own.)

“The thing” upset Alameda employee Handi Yang, the daughter of a Chinese official. SBF yelled at her to shut the fuck up when she was arguing against the idea. Later, in a group chat with SBF, Ellison and another Alameda employee, the other employee joked about the father turning them in immediately. Ellison explained the meaning of ‘lol’ to the judge and jury.

Today, at the end of Ellison’s testimony during the trial of Sam Bankman-Fried, or SBF for short, prosecutor Danielle Sassoon asked why she had qualified her answer. The “I guess,” explained Ellison, was just a vocal tic. It was not a question. It had been Bankman-Fried’s idea the entire time, she alleged.