Sam Bankman-Fried’s former CEO testifies that she committed fraud with him

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Caroline Ellison, a tech executive and one-time girlfriend of former FTX cryptocurrency exchange CEO Sam Bankman-Fried, testified on Tuesday that she participated in a fraud scheme alongside the embattled executive. Ms Ellison is the CEO of Alameda Research, a hedge fund that operated alongside FTX. She is one of three former members of Mr Bankman-Fried’s inner circle who have pleaded guilty to fraud charges and who have agreed to cooperate with the Manhattan US Attorney’s Office case against the crypto mogul, according to Reuters. Ms Ellison told the court that “Alameda took several billion dollars of money from FTX customers and used it for our own investments and to repay debts that we had.” She claimed Mr Bankman-Fried directed her company to take approximately $10bn in FTX customer money to repay loans, and to share misleading Alameda balance sheets with the company’s lenders to make its financial position appear less risky. Ms Ellison was asked why FTX ran out of money in November 2022, an event which caused widespread panic among crypto-traders who used the company to hold their assets. She explained that “Alameda had taken it to make our own investments and to repay our lenders.” She continued her testimony, telling the court that Mr Bankman-Fried allegedly considered raising money to repay FTX customers by raising money from Saudi Crown Prince Mohammed bin Salman. Ms Ellison placed the blame for the alleged schemes firmly in the lap of Mr Bankman-Fried. She told the court she faced a “constant state of dread” knowing that billions of dollars in loans were being recalled that could only be paid back using FTX customer money. “I was concerned that if anyone found out, it would all come crashing down,” she said. When asked why she went along with the alleged scheme, she said she did it because “Sam told me to.” Mr Bankman-Fried has pleaded not guilty to two counts of fraud and five counts of conspiracy, according to court records. He is arguing that wile he made mistakes running FTX, he did not intentionally seek to steal funds from his customers. His defense attorney, Mark Cohen, tried to cast doubt on the witnesses — including Ms Ellison — by asking jurors to consider whether the witnesses were willingly complicit in the alleged fraud and only distancing themselves to avoid further penalty. Gary Wang, who served as FTX’s technology chief, testified that Mr Bankman-Fried told him to let Alameda operate on a negative balance with FTX and borrow up to $65bn from the exchange’s holdings. A third witness, former FTX engineering chief Nishad Singh, will also testify during the trial. Ms Ellison has remained relatively low-profile since she pleaded guilty to her charges in December of 2022. She was featured in a New York Times report in July detailing her private writings. Those entries included details about the pain her breakup with Mr Bankman-Fried caused her and the anxieties she faced due to her work. Mr Bankman-Fried’s defense lawyers admitted that the FTX CEO was the one who shared the writings with the Times, which prompted a US District Judge to revoke his $250m bail and order him jailed for probably witness tampering. If convicted, Mr Bankman-Fried could face up to 110 years in prison.

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