In 2018, a bespectacled Stanford graduate named Caroline Ellison decided to leave her job on Wall Street to join a startup cryptocurrency hedge fund called Alameda Research because she thought she would earn more money to give to charitable causes.
On Tuesday, nearly a year after Alameda collapsed, Ellison took the stand to testify as a key witness at the criminal fraud trial against its founder, another budding young philanthropist who owned the now-bankrupt FTX cryptocurrency exchange: Sam Bankman-Fried.
Ellison became one of Bankman-Fried's top lieutenants as he expanded his crypto empire. The two lived together in a luxury penthouse in the Bahamas, and were on-and-off romantic partners.
Her firsthand account is expected to be crucial to efforts by Manhattan federal prosecutors to convict Bankman-Fried on fraud charges stemming from FTX's November 2022 implosion. He has pleaded not guilty to charges of stealing billions of dollars in FTX customer funds to plug losses at Alameda.
Ellison, who became Alameda's co-chief executive in 2021 and assumed full control last year, has pleaded guilty to fraud charges and agreed to cooperate with prosecutors.
She said at a Dec. 19, 2022, plea hearing that she helped Alameda make billions of dollars in loans to Bankman-Fried and other FTX executives, and hide them from lenders. During the hearing, Ellison said she was sorry for her actions and knew her conduct was wrong.
Bankman-Fried's defense lawyers have signaled that they plan to try to undercut Ellison's credibility and pin the blame for the collapses of FTX and Alameda on her. In his opening statement last week, defense lawyer Mark Cohen said Bankman-Fried had advised Ellison to hedge Alameda's bets against a downturn in cryptocurrency markets, but that she did not do so.
Without referring to Ellison by name, prosecutor Thane Rehn in his opening statement said Bankman-Fried had installed her as Alameda's chief as a "front," but that Bankman-Fried was still calling the shots.
Prosecutors have said that at a meeting on Nov. 9, 2022, Ellison told Alameda employees that the company borrowed FTX user funds to repay its lenders. An employee pressed her on who decided to use customer deposits.
"Um ... Sam I guess," Ellison responded, according to prosecutors' court papers.
ELLISON SOUGHT TO 'MAXIMIZE IMPACT'
Ellison's plea marked a dramatic turn in the course of her life.
The daughter of two Massachusetts Institute of Technology economics scholars, Ellison was a high achiever, taking part in math competitions throughout high school and college and landing a job in New York as a quantitative trader with Jane Street after graduating from Stanford University, she said in a July 2020 FTX podcast.
"All I did was read books," she said of her Boston-area childhood, adding she was "obsessed" with Harry Potter and "worked pretty hard in high school."
She met Bankman-Fried at Jane Street. Like him, she had grown interested during college in the effective altruism movement, which promotes data-driven philanthropy and encourages talented young people to take high-earning jobs and give generously to meaningful causes.
She told the FTX podcast she decided to join Bankman-Fried at Alameda despite lacking experience with cryptocurrencies to "maximize my impact."
"The EV (expected value) of how much money I'll end up making working here is pretty high," she said.
Ellison indeed earned money, including $28.8 million in bonuses in addition to FTX stock options, FTX's current management said in a July lawsuit against her, Bankman-Fried, and other former executives. FTX said Bankman-Fried took more than $500 million in fraudulent loans from Alameda.
Ellison nonetheless appears to have been unhappy at Alameda long before its collapse. In July, the New York Times published an article citing her personal writings from early 2022, in which she described feeling "unhappy and overwhelmed" at work and "hurt/rejected" by a breakup with Bankman-Fried.
U.S. District Judge Lewis Kaplan jailed Bankman-Fried for sharing the writings with the reporter, saying it likely amounted to witness-tampering.
Days before FTX declared bankruptcy, Ellison told Bankman-Fried her "increasing dread of this day" had been weighing on her for a long time, according to prosecutors.
"Now that it's actually happening," she wrote, "it just feels great to get it over with one way or another."
