Caroline Ellison, the former CEO of FTX-affiliated hedge fund Alameda Research, testified on Oct. 11 that Sam Bankman-Fried, who founded both Alameda and the failed cryptocurrency exchange FTX, told her to commit financial fraud. At the start of her testimony, Ms. Ellison confirmed that she had committed the crimes of fraud, conspiracy to commit fraud, and money laundering, to which she pleaded guilty in December 2022. As part of a plea agreement, she appeared as a witness for the prosecution at Mr. Bankman-Fried’s criminal fraud trial, which began last week. “He directed me to commit these crimes,” she testified, referring to Mr. Bankman-Fried. Mr. Bankman-Fried is facing seven counts of securities fraud, wire fraud, conspiracy, and money laundering. If found guilty, he could face decades in prison. Ms. Ellison also told jurors that Alameda Research had lent money to Mr. Bankman-Fried and other FTX executives, which they used to make political donations. As Alameda’s CEO, Ms. Ellison was paid more than $20 million in salary and bonus in 2021, and during much of her tenure, she was also engaged in a romantic relationship with Mr. Bankman-Fried, she said. Ms. Ellison said that she dated Mr. Bankman-Fried while running Alameda Research. FTX received high-profile endorsements from Hollywood celebrities and sports stars, and FTX executives lived lavishly, residing in a $40 million seaside penthouse in a gated condominium complex outside of Nassau, near FTX’s offices in the Bahamas. Most of the money went to Democrats and liberal-leaning groups, making him the second-largest donor to the Democratic Party and left-leaning causes after George Soros. He reportedly also donated far lesser amounts to Republicans, though he preferred to keep those donations quiet, fearing public criticism for supporting conservatives. Ms. Ellison’s testimony was consistent with last week’s testimony from Mr. Wang, FTX co-founder and former chief technology officer, who stated that starting in 2019, he had coded the FTX accounts of Alameda Research to allow Alameda to run a negative balance, effectively borrowing money from the exchange. Ultimately, this resulted in FTX taking more than $10 billion from FTX customers, who Mr. Wang said were unaware that their money was being siphoned off to pay for debts and trading losses at Alameda. Mr. Bankman-Fried’s attorneys have argued that Alameda was given the ability to run negative balances on its FTX accounts because of its role as a market-maker for the exchange, essentially an intermediary between buyers and sellers to provide liquidity for customers who were trading cryptocurrencies. However, the limits on Alameda withdrawals from FTX were increased from initial limits of $1 billion to $65 billion shortly before FTX’s collapse in 2022. According to both Mr. Wang and Ms. Ellison, Mr. Bankman-Fried told Ms. Ellison to repay the creditors, with FTX customers’ money being the only source of funds available to her at the time. Mr. Bankman-Fried has stated in media interviews that he wasn’t aware of fraudulent activity at FTX or Alameda, that he didn’t intentionally defraud investors, and that the collapse of his companies was the result of mismanagement by inexperienced executives. However, the testimony of both Mr. Wang and Ms. Ellison directly contradicts that defense. Ms. Ellison pled guilty to charges of securities fraud brought by the U.S. Justice Department, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, including a charge that she had illegally manipulated the price of FTT, the cryptocurrency created by FTX, and that she misrepresented the financial accounts of Alameda Research to investors to hide the extent of its indebtedness. Mr. Wang also pled guilty to charges of securities fraud.