Near the end of her second day on the witness stand, Caroline Ellison, former CEO of the crypto hedge fund Alameda Research, broke down. “I felt a sense of relief that I didn’t need to lie anymore,” she said, her voice cracking as she detailed the final days of the now-bankrupt crypto exchange FTX.
This was the climax in one of the most explosive days of testimony in the trial of Sam Bankman-Fried, former CEO of FTX. In charge of the crypto hedge fund that prosecutors argue facilitated the misappropriation of billions in customer funds, Ellison continued to build on her narrative from the day before, which had already detailed her unfair compensation, Alameda’s market manipulation, and other revelations.
However, her testimony on Wednesday included even more outlandish details: Bankman-Fried’s disbelief in blanket rules against lying and stealing, a Saudi prince and Thai prostitutes, as well as inside glimpses into Ellison’s mental state as the crypto empire she helped build collapsed in what she called “the worst week of my life.”
‘Maximize utility’
In addition to Gary Wang and Nishad Singh, Ellison was a key lieutenant in Bankman-Fried’s crypto conglomerate. However, having dated Bankman-Fried on and off since the fall of 2018, she had arguably a more privileged window into the FTX founder’s mind.
On Tuesday, she testified that Bankman-Fried had at one point told her that he gave himself a 5% chance “he would become president someday,” hinting at his alleged egotism. “When you say ‘president,’ what are you referring to?” asked Danielle Sassoon, the prosecutor questioning her. “Of the United States,” responded Ellison.
On Wednesday, Ellison gave the jurors a further glimpse into Bankman-Fried’s potential motivations for allegedly committing fraud. Shortly after the lunch break, she said that Bankman-Fried was a utilitarian, meaning that “he thought the only moral value that mattered was whatever would maximize utility,” which she explained as “essentially trying to create the greatest good for the greatest number of people or beings.”
And as opposed to other utilitarians, Bankman-Fried saw that “rules like ‘don’t lie’ or ‘don’t steal’ didn’t fit into that framework,” she said, adding that his views slowly influenced hers.
“When I started working at Alameda,” she testified, “I don’t think I would have believed [it] if you told me that a few years later I would be sending false balance sheets to our lenders or taking customer money.”
Foreign flings
Ellison’s testimony on Wednesday, which began with dry recountings of how she fudged balance sheets, turned electric when she referenced a Saudi prince and then, inexplicably, Thai prostitutes.
The prince she spoke of was none other than Mohammed bin Salman Al Saud, the leader of Saudi Arabia. Ellison said Bankman-Fried was courting the crown prince in the fall of 2022 to potentially invest in FTX, as Alameda allegedly continued to withdraw billions of dollars of customer funds from the crypto exchange to pay back loans and make risky bets.
The mention of Thai prostitutes came later in her testimony as Sassoon, the prosecutor, questioned Ellison on how Alameda allegedly bribed a Chinese government official to unlock approximately $1 billion Alameda had stuck on two Chinese crypto exchanges, OKX and Huobi (now HTX).
The Justice Department had previously charged Bankman-Fried in March for bribing a Chinese official but later rescinded the charge to save for another trial provisionally scheduled for next year. But the bribe, which Ellison said was $150 million, wasn’t Alameda’s first attempt to recoup funds from OKX and Huobi.
She testified that Alameda created several accounts on OKX “using the IDs of different people who I believe were Thai prostitutes, and we tried to basically have our main account lose money and have those other accounts make money.” Ryan Salame, another FTX executive who has also pleaded guilty, told her about the accounts, she said, without explaining how Salame knew about them.
Suffice to say, the Thai-prostitute gambit didn’t work, and Alameda decided to pay $150 million “for the thing,” she later wrote in a document she sent to Bankman-Fried.
‘Get it over with’
The prosecution’s direct examination of Ellison was broadly chronological, and on Wednesday afternoon, Sassoon questioned her about the last week before FTX declared bankruptcy.
After CoinDesk published a leaked balance sheet from the crypto hedge fund, customers began to withdraw funds from FTX. There was a run on the bank, and lenders began to recall their loans, she testified.
“This is the best mood I’ve been in, in like a year, to be honest,” she wrote in a message to Bankman-Fried. “I think I just had an increasing dread of this day that was weighing on me for a long time, and now that it’s actually happening, it just feels great to get it over with one way or another.”
Ellison began to tear up and her voice cracked as she read aloud the messages. In reality, she said, “this was the worst week of my life.”
