- Alameda CEO Caroline Ellison testified against SBF during the Oct. 10 hearing
- Ellison admitted that FTX customer funds were used to buy back Binance’s stake in the exchange
The behind-the-scenes of FTX – once a leading crypto exchange – continues to reveal itself as the criminal trial of founder Sam Bankman-Fried enters its second week. During today’s hearing (October 10), Caroline Ellison – the CEO of FTX’s investment arm – Alameda and SBF’s ex-girlfriend – testified before the jury that would ultimately decide Sam’s fate.
Ellison was one of the first people in Sam’s allies to join forces with US regulators, along with Gary Wang – the co-founder of FTX. She had pleaded guilty to committing fraud that led to the collapse of FTX. The Southern District of New York made the announcement in December 2022, immediately following SBF’s extradition. At the same time, Ellison agreed to cooperate with the Southern District of New York in his investigation.
Former Alameda chief reveals FTX’s internal operations
The testimony started with Ellison to claim that SBF “instructed” her to commit financial crimes, according to a series of tweets from Inner City Press. She stated that she was guilty of taking billions of money from FTX customers for investments by Alameda. While talking about the money used to pay lenders, Ellison said: “In the ballpark of $10 billion. Ultimately about $14 billion.”
She further admitted that this was the reason the exchange did not have the money to repay lenders. The exchange filed for bankruptcy in November 2022 after failing to meet customer withdrawal demands. The bank run started after a report emerged that the company’s balance sheet was dominated by the exchange’s token – FTT.
Connections back to Jane Street
Ellison met SBF early in her career on Jane Street, where she was a stock trader for 18 months. According to the book Going Infinite, SBF was in charge of teaching her class of trainees how to act. He then left the company a year later to found Alameda.
In March 2018, SBF met Ellison for coffee in California, where he “pitched her about joining Alameda,” according to a Forbes report. report. Her salary during her time at the company was $200,000, with a $20 million bonus in 2021. The former executive also admitted to having an on-and-off romantic relationship with SBF, adding that he aspired to be president of become the United States.
Movement of FTX client funds
Speaking about the move of funds from FTX to Alameda, Ellison stated that the exchange was transferring funds to its sister firm. This happened between 2020 and 2022. The funds worth $10 billion to $20 billion were used for loan repayments, investments and stablecoin conversions. She further stated that “it was used for the purpose of Alameda and other purposes.”
Ellison even brought up the platform’s involvement with Binance – the largest crypto exchange in the world – saying:
“If a coin were to trade at a higher price on Binance, we could withdraw from FTX and sell there. AUSA: Were you concerned about using Alameda’s FTX customer funds? Ellison: I thought customers didn’t know. But I was just a trader then.”
Binance was FTX’s biggest competitor and at one time investor, with a $2 billion stake. To repurchase this stake, Alameda used $1 billion in FTX customer funds. She claimed that SBF was afraid that Binance would “cause trouble.”
