Caroline Ellison: How a young math whiz with an appetite for risk became a major player in Sam Bankman-Fried’s corrupt crypto empire

After the fall of the cryptocurrency exchange FTX and the trading firm she ran, the 28-year-old became a public villain.
May 25, 2023, 6:30 PM UTC
Illustration by Joan Wong/photo from Twitter/@CarolineCapital
Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.

At a blond-wood table in a serene Japanese restaurant on a tree-lined street in Murray Hill, Manhattan, the 26-year-old Caroline Ellison was asked a pointed question by one of her friends.

“Are you a millionaire or a billionaire?” 

It was July 2021, and Ellison was soon to be appointed co-CEO of cryptocurrency trading firm Alameda Research, in San Francisco’s Bay Area. On a visit back to New York City, she had met up with a couple of friends and her younger sister for dinner, followed by a walk and ice cream from Ample Hills.

 The question was mostly a joke, the friend recalled to Fortune—but the friend (who has known Ellison since childhood, and asked not to be named) was also genuinely curious. Crypto was still on its pandemic-fueled upswing, nearing what turned out to be its peak valuation in November 2021, and there were plenty of newly minted crypto millionaires and billionaires being touted in the media. Ellison avoided answering, but the friend noted, “My read was that she was flattered I even thought ‘billionaire.’ ” 

That wasn’t because Ellison idolized the wealthy, the friend explained: “She values achievement. If she realizes she can be good at something, she’s gonna go into it to win.” 

At the time of the dinner, Alameda was not widely known outside cryptocurrency circles. But a year later the firm Ellison ran would become notorious for the central role it played in the downfall of crypto exchange FTX, which was once valued at as much as $32 billion. Billions in customers’ money was missing in what a U.S. attorney called “one of the biggest financial frauds in American history.” FTX’s cofounder, Sam Bankman-Fried, who once styled himself as “The White Knight of Crypto,” became a public villain—and so did Ellison. 

In December, Ellison pleaded guilty to charges of conspiracy to commit wire fraud, commodities fraud, securities fraud, and money laundering.

 “I agreed with Bankman-Fried and others to provide materially misleading financial statements to Alameda’s lenders,” Ellison told Judge Ronnie Abrams, according to a transcript released later. “I am truly sorry for what I did. I knew that it was wrong.”

 Judge Abrams asked if she knew it was illegal too.

 “Yes,” Ellison said. 

Newsletter-Blue-Line-15

To answer her friend’s question: Recent bankruptcy filings from FTX indicate that Ellison was never a billionaire, but she was a multimillionaire, and she had access to billions in customers’ money, with few if any safeguards. The filings suggest Ellison received $6 million in payments and loans over the life of the collapsed cryptocurrency exchange. Meanwhile, prosecutors say Bankman-Fried raked some $2 billion into his personal accounts. (Bankman-Fried has denied this.)

In the wake of the industry-shaking meltdown of FTX, Ellison has become something of a celebrity—her actions, appearance, and online presence examined in breathless articles claiming the leaders of FTX and Alameda all “dated each other” and lived in a polycule in the Bahamas. Gawker dismissed her as “a chipmunk-cheeked Harry Potter superfan.” As the New York Times reported in November, “on Twitter, amateur detectives have spent the last two weeks dissecting her life.”

But while Ellison’s onetime boyfriend Bankman-Fried was out giving interviews after FTX’s astonishing collapse, Ellison—a woman one college friend described as so reserved and studious “she would marry her math homework if that was legal”—virtually disappeared. That is, until she resurfaced on Twitter in early December, in unverified photos taken at a New York coffee shop (accompanied by a former colleague whom a friend identified to Fortune as Ellison’s current boyfriend). About two weeks later, she pleaded guilty as part of a deal in which she agreed to help federal prosecutors build their case against Bankman-Fried. 

Ellison acknowledged in court that she and her colleagues agreed not to disclose the nature of the relationship between FTX and Alameda, and that she went along with a plan to divert billions in customer deposits, which was used for venture investments and loans to Bankman-Fried and other FTX executives. They reportedly used that money to make political donations and buy expensive real estate

Ellison didn’t idolize the wealthy, a friend explained: “She values achievement. If she realizes she can be good at something, she’s gonna go into it to win.”

Though the charges Ellison pleaded guilty to carry a combined maximum sentence of 110 years in prison, prosecutors agreed to recommend lessening her sentence in exchange for her cooperation and testimony against Bankman-Fried. She has not been sentenced yet and was granted $250,000 bail. Her former colleagues, FTX cofounders Gary Wang and Nishad Singh, also pleaded guilty to fraud charges. Bankman-Fried has pleaded not guilty to 13 charges and is on house arrest in California on a $250 million bond.

Ellison’s sudden infamy was shocking to those who knew her. “When I picture her, I still picture Caroline as this petite, reserved, shy girl doing something low-energy or sedentary,” said a classmate from Stanford University. She did not come across, the person added, as “the Elizabeth Holmes of our class year.” (Holmes, who attended Stanford for a time, founded the failed blood-testing startup Theranos, which was valued at $9 billion at its peak. She was recently found guilty of conspiracy and fraud.) 

So who is Caroline Ellison? And how should we understand the remarkable rise and precipitous fall from grace of a person so young and, by all accounts, brilliant? Fortune contacted more than 150 of Ellison’s friends, former teachers, classmates, and colleagues. Nine were willing to speak about her. (Ellison’s attorneys declined to comment on her behalf.)

These interviews, along with Ellison’s posts on a now-deleted anonymous Tumblr and other writings, paint a picture of an ambitious and gifted young person who had been wildly successful academically going through a spectacular and very public failure. They reveal a person who spent her childhood and young adulthood grappling with questions about what it means to be ethical and honorable, while also seeking ways to prove her intellectual independence and singularity. 

In the intertwined worlds of cryptocurrency and the associated movement of effective altruism, Ellison found a culture that exalted getting rich as a moral good, and a landscape where her math genius and rationalist disposition helped her thrive and advance. It was a fantasy come true…until the bubble popped.

Newsletter-Blue-Line-15

Ellison grew up in Newton, Mass., the eldest of three daughters of an MIT economics professor, Glenn Ellison, and an MIT economics lecturer, Sara Fisher Ellison. (Both declined to comment for this article.) The Ellisons loved to entertain in the family’s 4,625-square-foot Victorian home, which was full of art and wood carvings made by Ellison’s maternal grandparents, including a mural of Ellison and her two younger sisters playing beneath a blue sky that their grandmother had painted in the dining room.

Brought up Catholic, Ellison wrote as a college senior that she liked the ritual of Mass and “the comfort of praying every night before I went to sleep.” But the family’s real faith was in economics—in models and numbers, and the notion that the free market solves all problems. Her father would suggest, for example, that universities could address their financial shortfalls by auctioning off 10 spots to the richest students, who’d then be guaranteed admission, said a childhood friend of Ellison’s. 

Ellison also took on the belief that there was a superiority in knowing economics. (“#Listen to economists they know things” was one hashtag on her now-deleted Tumblr.) She applied economic reasoning to all sorts of decisions—including weighing whether to bake cookies or play tennis in a romantic relationship by utility function, or “utils.” 

But economics, with its assumption of rationality in human behavior, couldn’t help her understand herself and her struggles with morality. Nor could economics explain human relationships. For that she became obsessed with self-help. 

“Everything I do, unless it’s something my family and all my friends and a panel of normal people would agree is reasonable, I worry that it’s fundamentally bad in some mind-altering way that makes it impossible for me to see its badness,” Ellison wrote. 

She applied economic reasoning to all sorts of decisions—including weighing whether to bake cookies or play tennis in a romantic relationship by utility function, or “utils.”

She was an advice column connoisseur, and she also liked the popular Reddit thread “Am I the Asshole?” (AITA), where people describe what they did and the hive mind offers a ruling. Ellison seemed to find comfort in searching for patterns in the forum. In March 2022, as Alameda’s losses were mounting, she spent a morning coding entries from AITA, producing graphs that suggested “a weak effect of men being more likely to be assholes, and a stronger one of men being more willing (or women less willing) to post in cases where they are the asshole.”

Ellison’s younger sisters were mathematically talented, but Ellison was in another league, said a friend. And several of Ellison’s friends pointed out that she was a polymath, good at more than just, well, math. There seemed to be no kind of puzzle she couldn’t master. She stumbled across some linguistics problems online, decided they were “really fun,” and the next thing you knew she was competing at the International Linguistics Olympiad. Ellison won a prize in the 2011 competition for the best solution to one of the problems, which included translating to Vai, a language in Liberia and Sierra Leone spoken by some 100,000 people at the time. 

Ellison was also a voracious reader of fiction who—as a story she told goes—was tackling Harry Potter books at age 5 because she was too impatient to wait for her parents to read her the next installment. An elementary school yearbook lists her favorite book as Moby Dick, a title that induced at least a few snickers from classmates, a friend recalled. If Ellison was bothered, she didn’t let on. 

“She did not care whether she was popular, that’s for sure,” said Mikhail Shklyar, a counselor at a super-selective high school summer math program Ellison attended. “She was not a girl who would spend a lot of time trying to appear like something else. She could be extremely frank.”

At the camp—mornings of math lectures, evenings of problem sets, and something called Primetime Theorem, a predinner math-related guest-speaker event—Ellison stood out for her quiet confidence, even in a room of math geniuses. Said Ian Lopez, who attended the program with Ellison: She kind of “floated on a plane above, and just was who she was and hung out with the folks she found interesting.”

Every person Fortune spoke to described Ellison as either “reserved” or “quiet” (or both). As a high school senior, Ellison wrote a column for the school paper with advice to her freshman self, including: “Work on talking to people. It may seem unpleasant now, but I promise it gets easier with practice.” 

Newsletter-Blue-Line-15

Bankman-Fried has come across in his press interviews as a swashbuckling risk taker who went too far. But despite her reserved demeanor, Ellison’s appetite for financial risk appears to have been similarly huge. In one Tumblr post she wonders whether it’s “infinitely good to do double-or-nothing coin flips forever.” Answer: Yes, because the upside is “unbounded,” and the downside is just “your entire net worth.” 

In a piece of fiction Ellison wrote, she had a dragon describe the personality of the eldest of three daughters who was “known in the village for her cleverness”:

“You have always been called clever, but you have always been uneasy about it,” the dragon pronounced. “You think that people expect great achievements from you, but in truth you have no original ideas, and lack the drive to make your mark on the world. You fear you are capable of nothing more than being an average farmer’s wife. If you bring back this treasure, you will be remembered for your deed. You seek this treasure out of fear and need for the approval of others.”

For Ellison, who enjoyed live-action role-playing (“I just like excuses to spend a few hours implementing evil schemes while wearing a corset,” she wrote), managing billions in investors’ money may well have been a game she got caught up in, a kind of quest.

“She isn’t interested in money as, like, a thing of survival or to buy a cute townhouse,” said one friend. “She wasn’t greedy. To her, money is like a game where she’s going to win. But also it’s like an intellectual exercise. She’s winning based off her intellect.” 

Who is Caroline Ellison? And how should we understand the remarkable rise and precipitous fall from grace of a person so young and, by all accounts, brilliant?

After high school, Ellison had her pick of top-tier colleges: Harvard, MIT, and Stanford all accepted her. Craving a new challenge—she’d already spent plenty of time at MIT and Harvard—she chose Stanford, on the opposite coast. There she majored in math and set about achieving academically seemingly as easily as she did in high school.  

 In Stanford’s Math 51H, a proof-based honors class considered among the hardest at the university, “she was one of the smarter ones,” said Govinda Dasu, a classmate. “She was always calm, and I don’t think she was ever worried about scoring badly.” Students would go to professors and graders to negotiate for more points on the homework, and some would drop the class. Ellison wasn’t one of them.  

At Stanford, Ellison also discovered effective altruism, a movement she would describe on a now-deleted 2020 FTX podcast as “trying to do the most good you can and using expected value to measure that good.” (The expected value, or EV, of an act is the sum of the value of each of its possible outcomes multiplied by their probability of occurring.) To that end, effective altruism encourages young people to take high-paying jobs, amass wealth, and donate it. 

Ellison embraced the principle, and carried it through her postcollege professional career. Asked by someone on Tumblr why she left the quantitative trading firm Jane Street, she replied: “I loved it, but I thought doing this [Alameda] would be higher EV.” 

On her Tumblr, she wrote that she’d planned to give at least 10% of her salary to charity. A vegetarian, she favored an organization promoting alternatives to animal protein, and said animal welfare charities were “way more cost-effective.” She was less interested in charities focused on human welfare. While decreasing poverty for humans was “great in the short term,” she wrote, “it also causes people to eat more meat, contribute to climate change, etc.” 

Newsletter-Blue-Line-15

It was also at Stanford that Ellison encountered one of her first major setbacks. In her junior year, Ellison applied for summer internships at typical tech software jobs—a friend thinks Palantir and Facebook were among them—and didn’t get any interviews. 

This was a huge blow, noted an old friend. She “was used to being top of the top, like beyond normal rankings,” the friend said. “And suddenly here was this other job market where she’s, like, replaceable or not even good enough to get the role.” 

So she applied for trading jobs, where the interviews involved being asked to solve the kind of math problems she was used to from years of competitions. She landed an internship at Jane Street in New York City, which specialized in ETF arbitrage. “I sort of haphazardly stumbled into a career,” she later told her high school magazine.

After graduating from Stanford, Ellison accepted a full-time job at Jane Street. She took an apartment close to the office, in the Financial District. A friend described it as decorated in a slightly more elevated style than your average recent college grad: There was Ikea furniture, but there was also a carved wood box of her grandfather’s, and a paper light (a present from her boyfriend at the time) from the Noguchi Museum, which she loved. “She was so normal,” the friend recalled. 

Ellison thrived in Jane Street’s nerdy atmosphere, and she quickly adopted the mindset of high-frequency trading, wondering why anyone would invest in individual companies. “She was like, ‘Why would you do that? You never make money over the long term,’ ” noted a friend. 

At Jane Street, she worked with Bankman-Fried—another child of professors, and a 2014 graduate of MIT. The two bonded over their belief in effective altruism. 

On a Jane Street recruiting trip to California in late 2017, Ellison met up with Bankman-Fried, who had left Jane Street earlier that year, for tea at Jump’n Java near Berkeley. She was dressed as a wood nymph, en route to a LARP (live-action role-playing game). Bankman-Fried offered her a job at his new venture, Alameda, and she was intrigued. 

The job offer sparked a painful breakup with her then boyfriend, who, according to a friend, told her he didn’t love her; that she shouldn’t stay in New York for him. Ellison was distraught, but even this experience seemed to reinforce her faith in EV as a guiding principle—she wrote on her Tumblr that “ideas can be wrong, charities can be ineffective, and relationships can be unhealthy … Maximizing EV means risking that you’ll make mistakes, and those things will happen sometimes.” 

In March 2018, Ellison moved to California and quickly embraced life in the Bay Area. She went to meetups for followers of the Slate Star Codex blog, a heavily techy crowd—many of them, like Ellison, fans of both statistics and the effective altruism movement—who embraced rationalism, or the idea that reason and logic should trump feeling. She baked scones. She wrote a positive review of Vikram Seth’s novel of Indian matchmaking drama, A Suitable Boy, in rhyming couplets: “For now I live my life in prose,/Trapped in the cells of spreadsheet rows./To read a novel of this hue/Can somehow make my soul feel new …” 

After a year in Berkeley, Ellison wrote that she’d moved West because she didn’t like the person “who I was crystallizing into.” She added (ironically in hindsight): “I didn’t quite know how I wanted to change, nor did I feel capable of taking actions to make it happen, but I thought if I threw myself on the mercy of whatever supernatural entities govern San Francisco Bay, that something would come of it, and I was right.”

In a video that has been shared widely since the fall of FTX, Caroline Ellison is interviewed about her role at Alameda Research.
Screen shot from El Momento Podcast

Alameda in 2018 was basically just Ellison, Sam Bankman-Fried, and the firm’s cofounder and chief technology officer, Gary Wang (a friend of Bankman-Fried’s from math camp, who went on to cofound FTX with him and Nishad Singh in 2019). By the holidays, catching up with a friend, Ellison said “sexual tension” had developed in the office, where she was spending nearly all of her time. At some point in 2019, Ellison and Bankman-Fried became involved. According to a friend, Ellison didn’t see this as a love match, as she had her earlier relationship.

As FTX and Alameda grew—and Bankman-Fried appeared increasingly successful—Ellison felt validated on her choices on both counts, her friend said: “I think when Alameda started blowing up and becoming huge, she felt like she had, you know, it’s like you invested in Amazon when it was $3 and then it became $3,000. That’s what she felt like about her decision. And that’s what she felt like about Sam.”

Newsletter-Blue-Line-15

Ellison was rising within Alameda, though she struggled with confidence as the young female boss of a mostly male team. As she wrote in December 2021, “Something I’m bad at is, like, expressing broad disagreement with people,” particularly men. 

In another post, she compared herself to the J.K. Rowling character Hermione Granger in a Harry Potter fan fiction scenario where the young witch is the only female general in an all-male army. “If Hermione Granger can be a general in one of Quirrell’s armies, I can send a message asking some guys if there’s been any progress on the thing,” she wrote on her Tumblr, as if trying to convince herself. 

But her troops were ambivalent, at best. No one doubted her intelligence, but Ellison “didn’t inspire great confidence,” said a former colleague who worked at FTX at the time. “You weren’t going to go to war for her.” 

When Bankman-Fried—on his apology tour after the company’s collapse—laid the blame at her feet in an interview, she was silent.

Around September 2021, Ellison texted a friend that she and Bankman-Fried had broken up. She wasn’t particularly upset, the friend told Fortune. “Emotionally, she was done with him.” The friend replied: “Congrats” and asked if it hurt to see him around. Ellison replied, “No, it’s just mildly annoying.”

This was also about the time that Ellison became co-CEO of Alameda. Her fairly steady stream of Tumblr posts slowed to a trickle. She knew that her team all read her Tumblr, so as a boss her December 2021 post about her struggle to disagree could be read as a call for help.

She wrote that she had a hard time expressing general disagreement, other than when she had data to refute the other person’s point. But sometimes, she wrote, her disagreements weren’t specific—they were more like, “ ‘I have a generally negative impression of the quality of your work,’ or ‘You’re making a lot of claims I can’t personally evaluate but don’t trust your judgment on.’ ” She concluded: “So I think I just smile and nod in these situations, and people end up with a mistaken impression I agree with them more than I do.” Sometimes, she wrote, she ended up deciding, “I think you’re probably full of shit, but yeah I’ll give you some resources on the off chance you’re not.”

Newsletter-Blue-Line-15

One way to understand Ellison is the way she herself does: via the millennial-favorite Enneagram personality model, which breaks people into nine archetypes. Ellison liked to guess what Enneagram numbers people were, and as a fan of Taylor Swift, Ellison looked for signs in the singer’s lyrics that she and Swift were the same “type.”

Ellison is an Enneagram Three, “the achiever,” to whom success—and appearing successful—is most important, and being insignificant or a failure is the deepest fear. Threes “look for ways to win in life, reassuring themselves that they are valuable,” explains the online personality test maker Truity. 

Of course, when success itself is your only purpose, it’s very easy to lose the plot. 

And as the FTX narrative unraveled, Ellison seems to have realized she could no longer control her own story. Ellison’s last Tumblr entries, soon after the crypto market crashed in May 2022 and Alameda’s lenders began executing margin calls and “loan recalls,” are a handful of book reviews. In August 2022, after crypto lost nearly 20% of its value in weeks, she published a list of facts about old-school robber baron John D. Rockefeller and his legal travails.

Shortly after that, Ellison went completely dark. She’d spent nearly a decade sharing the most personal details of her life online, scrutinizing her motivations and interrogating her morals, but she deactivated or made private all of her social media accounts. 

When Bankman-Fried—on his apology tour after the company’s collapse—laid the blame at her feet (telling a Vox reporter that it was the choices made in Ellison’s realm that really caused the problems), she was silent. 

In the Securities and Exchange Commission’s 38-page complaint against Wang and Ellison, she comes across not as a dashing protagonist but as the secondary character: It uses variations on “at the direction of Bankman-Fried” 14 times, nine of them specifically about Ellison. 

This article appears in the June/July 2023 issue of Fortune with the headline, “The Misadventures of Caroline Ellison.”