The trail goes straight to Sam Bankman-Fried

Bankman-Fried, Customer Money, and the FTT Token: A Memoir of a Censored Analogue to a Gambling Addiction

Ellison said that she was stressed and had talked to Bankman- Fried about the company’s ability to pay back loans.

Bankman-Fried’s cavalier attitude toward lying rubbed off on her, Ellison testified. Ellison did not believe you if you told her that she would be sending false balance sheets to our lender or taking customer money, but over time, it became more comfortable for her. She cried while testifying about the days when Alameda Research and exchange FTX fell.

The problem was not with the math, but with the way it was written. It was that Ellison’s calculations assumed Alameda could borrow $1.8 billion in normal dollars and $1.5 billion in crypto from FTX. The spreadsheet makes this clear with a row labeled “FTX borrows,” which Ellison said were customer funds.

The FTT token was created by Bankman-Fried and Wang. For free, Alameda got a war chest of 60 to 70 percent of initial supply, while seed investors got 10 cents a coin, and first listed at $1 a coin. Bankman-Fried felt that $1 per coin was psychologically important, Ellison said, and that he directed her to buy up FTT using Alameda if its price fell below a dollar.

Ellison found that the $3 billion investment, as conceived, “would put Alameda in a significantly riskier position and make it much less likely or almost impossible that we would be able to pay off our loans if all of our loans were called at once.”

She asked for equity but Bankman- Fried told her it would be too complicated. She got a $200,000 salary, even as CEO, with bonuses that ranged from $100,000 to $20 million.

That gave Ellison an unusual view of his character. She said that he was very ambitious. Besides telling her about his presidential chances, he also told her that if there was a coin flip where tails destroyed the world and heads made the world twice as good, he’d flip the coin. He said this was a risk-neutral manner of saying he had a gambling addiction.

Shutting Alameda: Should Everdell Liquidate the FTX Account? Wang and Ellison Revisited

In hand-written notes, Ellison outlined the problems with shuttering Alameda. Do they include them? Ellison said that Alameda had a job of market making for shitty things. Plus, Alameda was a backup liquidity provider for FTX.

Ellison pleaded guilty to several criminal charges last year and was cooperating with the US government in the Bankman-Fried case.

Ellison was hunched in on herself as she walked into the courtroom, wearing a dusty rose dress with a gray blazer over it, looking less like an executive than like a girl who’s borrowed her boyfriend’s coat because she’s cold. When the prosecution asked her to identify Bankman-Fried, she had trouble finding him and gazed around the courtroom for more than 20 seconds — apparently he was incognito with his new haircut. After she did spot him, she was asked to identify him, which she did by identifying him as wearing a suit. This got chuckles from the rest of the defense table, also all in suits.

It seemed like a sideshow by the end of the day. Bankman-Fried had been vibrating slightly during Wang’s testimony. During Ellison’s testimony, his bouncing became more noticeable.

Wang was not able to help himself out. Wang told the government about market making in earlier interviews, but what he says in court is different. I say “apparently” because Everdell was probably giving him his previous testimony to refresh his recollection, but Wang was insisting he didn’t remember. In any event whatever Wang was shown wasn’t submitted as evidence or shown to the court. The jury did most of the work that the defense has done so far.

Wang testified last week that Alameda had access to a special credit line and had the option to take its balance into the negative without triggering the end of the account. Everdell tried to undermine the claim by mentioning the spot margin program, which allowed users to lend each other assets. There was a way to have a negative balance in a coin. It was not, however, possible for those accounts to avoid liquidation, as Wang testified Alameda could do — or to have an overall negative balance. I think the defense is hoping that the jurors are confused so that they throw up their hands.

Gary Wang, the chief technology officer of FTX and co-owner of both FTX and Alameda was cross-examined by the defense. Christian Everdell, one of Bankman-Fried’s defense attorneys, couldn’t undo the damage of last week’s code review. But he managed to shake the rust off long enough to make Wang sound less reliable, drowning the jury in confusing technicalities.

I’ve got some shitty ex-boyfriends, but none of them made me the CEO of their sin-eater hedge fund while refusing to give me equity and bragging about how there was a 5 percent chance they’d become the President of the United States, you know? Absolutely counting my blessings after Caroline Ellison’s first day on the stand. I wonder how many of the nine women on the jury are doing the same.

The government’s star witness in the trial of FTX’s disgraced founder is the former girlfriend of Sam Bankman-Fried and a top executive in hiscryptocurrencies business empire.

For months, Bankman-Fried tried to regain access to those assets through a variety of methods. Ellison testified how colleagues at Alameda set up accounts on the Chinese exchange tied to the identities of Thai prostitutes, hoping they could somehow use them to siphon the money away from the frozen account.

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.

Sam Bankman-Fried is on trial for seven counts of wire fraud and conspiracy. FTX was a fraud “from the start,” the Securities and Exchange Commission alleges — with a “multi-billion-dollar deficiency caused by his own misappropriation of customer funds.”

The Successes of Alameda and Bankman-Fried in Bank Fraud and Bribery at the FTX Wall Street

“I handled a lot of day-to-day decisions and responsibilities in Alameda,” she testified. “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.”

It was Ellison who pointed out that there were always difficult power differences between her and Bankman-Fried.

Ellison said Bankman-Fried directed her to make Alameda’s financial picture look better, and to ignore requests for more information, during her testimony.

As panic grew among the top ranks of FTX, Bankman-Fried talked a lot about how he could raise more money from lenders and investors, Ellison testified.

Bankman-Fried tried to get money from the Crown Prince of Saudi Arabia. She said that money from Saudi Arabia would be used to pay back Alameda’s loans. But that funding never materialized.

By the fall of 2022, Ellison said, she and other executives at the company were holding onto hope, however blindly, that they could secure additional financing from someone, or that the price of cryptocurrencies would go up. She said it would lift the value of assets on Alameda’s books.

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 whose father worked for the Chinese government protested repeatedly. Ellison said Bankman-Fried screamed at the employee to “shut the f— up.”

The testimony can be used to show “the trust and confidence” Ellison and Bankman-Fried had in each other.

Kaplan told the jury that an allegation of bribing a foreign official was not included in the charges in this trial. Bankman-Fried is going to be charged with bank fraud and bribery at a separate trial next year.

Everyone stood and faced Judge Kaplan’s two wooden doors after the prosecutors called her to the witness stand. Ellison was taken down the aisle to the witness stand.

The daughter of M.I.T. economists, Ellison was a math major at Stanford University, and in her testimony, she described how she and Bankman-Fried met at the trading firm Jane Street. She was an intern, and he was a trader.

Ellison told the court that Bankman-Fried and she started sleeping together. And “in the summer of 2020, we eventually started a romantic relationship.”

Source: She’s the star witness against Sam Bankman-Fried. Her testimony was explosive

Sam Bankman-Fried, the Blockchain Ambassador, testified that FTX lacked customer funds during his tenure at Alameda

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.

Sam Bankman-Fried was an ambassador for improving the world through effective altruism, he was just a crypto wunderkind. The answer to your question about how he fit those values with all the lying that he did during his time at FTX is simple, and not a lot to ask about.

She testified that the moral rule that mattered was maximal utility, as lying and stealing were permitted. I looked at his parents, Barbara Fried and Joseph Bankman, to see if they liked what they saw. In any case, the approach apparently worked for much of Bankman-Fried’s life — right up to demanding doctored balance sheets for the company Ellison supposedly ran.

Ellison knew this likely wasn’t possible. She testified that FTX customer funds had been utilized to pay off those loans. The exchange wouldn’t have the money if a lot of FTX customers withdrew 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. Crypto exchanges aren’t banks; they don’t lend out customer money. At least, the honest ones don’t.

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.

Ellison said he told her not to put anything in writing that she wouldn’t want to see on the front page of The New York Times. She wrote a bunch of memos about their relationship. Later, Bankman-Fried would literally leak them to that paper.

Ellison said that he slept on a bean bag in the office. This had been thrown into question by Bankman-Fried’s college roommate in earlier testimony.

Bankman-Fried thought the move would make bolder statements, but he didn’t want to. Bankman-Fried originally wrote, “Heh, I see something is really trying to FUD us.” Ellison wrote her own version of the original, “Heh, I see someone is really tried to FUD us.”

Ellison sent a text as the collapse was happening. “This is the best mood I’ve been in a year tbh,” Ellison messaged Bankman-Fried. It isn’t clear if the date of the screen grab came from Bankman-Fried or not. Ellison cried as he looked at the messages. She said that the week was the worst of her life. I had a lot of different feelings and moods that week.

Relief was one of the feelings. The truth coming out was “something that had been in my mind every day,” she said. The thing she’d been dreading had happened and “I didn’t have to lie any more.” She said she felt “indescribably bad” about all the people “who trusted us that we had betrayed.” A court clerk passed her a tissue.

It also suggested something else: the things you put in writing can, potentially, save you. It’s a lot harder to paint Ellison as the sole decision-maker when she’s got contemporaneous evidence that she didn’t make a move without running it by Bankman-Fried.