Caroline Ellison, the previous girlfriend of Sam Bankman-Fried and a high govt in his cryptocurrency enterprise empire, has lengthy loomed because the U.S. authorities’s star witness within the ongoing trial of the disgraced founding father of FTX.

And over a day and a half of testimony in a federal courtroom in Manhattan, she delivered.

In testimony on Tuesday and Wednesday that received tearful at occasions, Ellison accused Bankman-Fried of being the mastermind behind a concerted effort to steal billions of {dollars} from clients, buyers and lenders.

And as Bankman-Fried’s former girlfriend, she had intimate information of each the corporate and the previous crypto superstar who now faces seven legal costs that would ship him to jail for the remainder of his life.

Listed below are 5 takeaways from Ellison’s explosive testimony.

Portray Bankman-Fried because the mastermind

Prosecutors are attempting to show that Bankman-Fried engineered and orchestrated an enormous fraud.

He’s accused of misusing billions of {dollars} in FTX buyer cash by directing the funds to Alameda Analysis, an funding agency that Bankman-Fried based earlier than FTX and that Ellison finally ran.

Though Bankman-Fried’s legal professionals are justifying the switch of funds as official loans, prosecutors are looking for to color it as fraud, arguing FTX buyer cash was used to plug monetary holes at Alameda, in addition to to make speculative investments, and to finance Bankman-Fried’s lavish way of life.

In her testimony, Ellison sought time and time once more to painting Bankman-Fried because the decision-maker on the firm that she says she solely nominally ran.

Ellison described Bankman-Fried as being “the one who arrange the methods that allowed Alameda to take the cash, and he was the one who directed us to take buyer cash to repay our loans.”

Although Ellison was Alameda Analysis’s CEO, she described her position as irritating. She did not get a elevate when she was promoted, she mentioned, and Bankman-Fried continued to make key selections even after he left Alameda formally to give attention to FTX.

“I dealt with a variety of day-to-day selections and duties in Alameda,” she testified. “However for any main selections, I might at all times run them by Sam, and I might at all times defer to Sam if he thought that we should always do one thing.”

When the prosecution requested her to clarify why she was so deferential, Ellison famous there was at all times a troublesome energy dynamic between her and Bankman-Fried.

“I might say the entire time that we have been relationship, he was additionally my boss at work, which created some awkward conditions,” she mentioned.

Describing Bankman-Fried’s willingness to gamble

In her testimony, Ellison additionally painted Bankman-Fried as prepared to take a unprecedented quantity of danger with FTX’s funds.

Ellison recalled Bankman-Fried’s affection for video games of likelihood and his tolerance for danger. For instance, she remembered how he as soon as talked about being prepared to lose $10 million if he drew tails in a coin flip — so long as he had the prospect to win greater than $10 million if he drew heads.

Bankman-Fried took that very same strategy to working his companies, Ellison mentioned.

She described how, in 2021, Bankman-Fried wished Alameda to spend $3 billion on a sequence of speculative investments in startup corporations. She was charged with modeling how an funding of that dimension might have an effect on Alameda’s steadiness sheet.

Ellison discovered that the $3 billion funding, as conceived, “would put Alameda in a considerably riskier place and make it a lot much less doubtless or virtually inconceivable that we’d be capable of repay our loans if all of our loans have been known as directly.”

Ellison offered these outcomes to Bankman-Fried and instructed that the proposed funding can be too dangerous given the state of Alameda’s funds. However Ellison mentioned Bankman-Fried ordered her to undergo with it.

Manipulating steadiness sheets

Ellison described Alameda’s monetary place as more and more precarious as 2022 unfolded.

She was harassed, Ellison mentioned, and detailed how she conferred with Bankman-Fried in regards to the steadiness sheet at Alameda, noting rising issues with the corporate’s skill to pay again loans.

“This was a time of disaster for Alameda,” Ellison advised the courtroom.

It was throughout this time, Ellison mentioned, that she and Bankman-Fried started to take much more cash from FTX clients to pay again Alameda’s loans. It was, she mentioned, “the one choice on the desk.”

In 2022, by late summer season, Alameda had funneled greater than $14 billion from FTX clients — all with out their information or consent.

“We have been in a foul state of affairs,” she mentioned.

At a number of occasions throughout her testimony, Ellison mentioned Bankman-Fried directed her to govern spreadsheets to make Alameda’s monetary image look extra favorable and to disregard requests from lenders for added data.

Time and again, she mentioned she did what Bankman-Fried requested her to do.

In accordance with Ellison, when an govt at Genesis — which had supplied Alameda with a whole bunch of tens of millions of {dollars} in loans — requested for an up to date steadiness sheet, Bankman-Fried “instructed I ought to discover some alternate methods to current the data.”

So Ellison created seven choices, and she or he mentioned Bankman-Fried suggested her to ship a model that minimized the scale of Alameda’s money owed, whereas taking part in up the value of the agency’s holdings of FTT, a cryptocurrency that Bankman-Fried created.

Ellison additionally mentioned she disguised practically $5 billion in private loans that Bankman-Fried and several other deputies acquired.

As a downturn within the cryptocurrency market deepened in 2022, Alameda’s state of affairs worsened.

As Bankman-Fried and his deputies labored behind the scenes to seek out methods to pay again billions of {dollars} in loans owed by Alameda, Bankman-Fried was making public pronouncements that have been at odds with what was actually taking place. On social media, for instance, he claimed his companies have been effective.

Making an attempt desperately to boost funds

As panic grew among the many high ranks of FTX, Bankman-Fried talked loads about how he might elevate more cash from lenders and buyers, Ellison testified.

She mentioned Bankman-Fried talked repeatedly about making an attempt to get cash from Mohammed bin Salman, the crown prince of Saudi Arabia. The plan, as she detailed it, was to make use of cash from Saudi Arabia to pay again Alameda’s lenders. However that funding by no means materialized.

By the autumn of 2022, Ellison mentioned, she and different executives on the firm have been holding onto hope, nonetheless blindly, that they may safe extra financing from somebody or that the value of cryptocurrencies would go up. That, she mentioned, would raise up the worth of the belongings on Alameda’s books.

“I used to be in a state of dread,” she mentioned.

In the end, nonetheless, FTX and Alameda collapsed, and briefly order, FTX declared chapter and Bankman-Fried was arrested. Days later, Ellison pleaded responsible to a number of legal costs and agreed to cooperate with federal prosecutors of their case in opposition to Bankman-Fried.

Ellison’s testimony additionally make clear one other incident that would land Bankman-Fried in additional hassle.

In early 2021, a Chinese language cryptocurrency trade froze Alameda’s buying and selling account, and the agency misplaced entry to roughly $1 billion in belongings.

For months, Bankman-Fried tried to regain entry to these belongings by means of a wide range of strategies. Ellison testified how colleagues at Alameda arrange accounts on the Chinese language trade tied to the identities of Thai prostitutes, hoping they may by some means use these accounts to siphon the cash away from the frozen account.

In the end, Ellison mentioned, Alameda transferred $100 million in funds to what she understood to be Chinese language authorities officers to unfreeze the account, which might represent a bribe.

Ellison described a gathering by which a colleague whose father labored for the Chinese language authorities protested repeatedly. Ellison mentioned Bankman-Fried screamed on the worker to “shut the f*** up.”

Choose Lewis Kaplan, who’s presiding over the trial, allowed the usage of that testimony “for restricted functions” — to reveal “the belief and confidence” that Ellison and Bankman-Fried had in one another.

However Kaplan additionally made clear to jurors that an allegation of bribing a international official isn’t one of many costs on this trial. However at a separate trial, anticipated to happen subsequent 12 months, Bankman-Fried will face costs of bribery and financial institution fraud.

Why Ellison’s testimony issues

Although different former high executives at FTX companies are testifying through the trial, Ellison was at all times thought-about an important witness.

After prosecutors first known as her to the witness stand, everybody stood and confronted the 2 wood doorways in the back of Kaplan’s courtroom. Moments later, Ellison was led down the middle aisle to the witness stand.

When the prosecution requested Ellison whether or not she might determine Bankman-Fried for the jury, Ellison stood, squinted and scanned the room. It took virtually a minute for her to find him.

It has been virtually a 12 months since Ellison pleaded responsible to a number of legal costs, together with counts of fraud and conspiracy, and agreed to cooperate with the U.S. authorities in its multicount case in opposition to Bankman-Fried.

She is hoping for leniency in trade, when she is sentenced after this trial ends.

The daughter of Massachusetts Institute of Expertise economists, Ellison was a math main at Stanford College, and in her testimony, she described how she and Bankman-Fried met on the buying and selling agency Jane Road. She was an intern, and he was a dealer.

Earlier than lengthy, the defendant began his personal crypto-focused funding agency, known as Alameda Analysis, and Bankman-Fried satisfied Ellison to hitch its ranks. However their relationship wasn’t strictly private.

In 2018, she and Bankman-Fried “began sleeping collectively on and off,” Ellison advised the courtroom. And “in the summertime of 2020, we finally began a romantic relationship.”

Over the course of hours of testimony, she described intimately private {and professional} ups and downs, in addition to the conspiracy that she has admitted to being an integral a part of.

“Once you have been working at Alameda, did you commit any crimes?” the prosecution requested Ellison.

“Sure,” she mentioned. “We did.”