By all accounts, Caroline Ellison hated her job at Alameda Research, the hedge fund where she has now pleaded guilty to helping Sam Bankman-Fried siphon billions of dollars of FTX customer money.
She cried on her first week at the job, according to journalist Michael Lewis, after learning the company was much less stable than Bankman-Fried had told her. She entered into a relationship with the crypto golden boy, which he refused to acknowledge despite her multiple pleading memos. Now, in his criminal trial, her former boss and lover is attempting to blame the downfall of his operation on her.
But on Tuesday, Caroline Ellison got her revenge.
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Wearing a gray blazer and pink dress, Ellison—who has already pleaded guilty to her role in the alleged fraud—took the stand in a downtown Manhattan courtroom as possibly the most important witness in the trial. And she did not hold back.
Early in her testimony, a federal prosecutor asked Ellison, 28, if she had committed any crimes during her work at Alameda Research, Bankman-Fried’s hedge fund. “Yes,” she answered. “We did.” Specifically, she said, she had engaged in fraud, conspiracy to commit fraud, and money laundering.
“He directed me to commit these crimes,” she said.
Ellison’s questioning was briefly delayed when a prosecutor asked her if she recognized Bankman-Fried in the courtroom. Because of her short stature, she was forced to stand up, then spent roughly 30 seconds scanning the area, evidently unable to see or recognize him. Bankman-Fried’s recently shortened hairdo may have been to blame.
After identifying her former boyfriend, Ellison further detailed the crimes they allegedly committed together. In all, she said, she and her co-conspirators misappropriated $14 billion in customer deposits to pay off loans and fund investments, though she said they were able to repay some of those assets.
Ellison further claimed that, at Bankman-Fried’s direction, she compiled misleading balance sheets that hid Alameda’s true risk profile from lenders. At the same time, she claimed, he worked to obscure his involvement with Alameda, hoping to avoid public relations issues if people came to realize the hedge fund was closely intertwined with FTX. (Ellison said that Bankman-Fried nonetheless remained the ultimate decision maker at Alameda.)
Ellison described her former boss as “risk neutral,” saying he would be more than willing to bet and lose $10 million if he’d had the chance at earning slightly more than a $10 million return.
She recounted him once offering up a hypothetical coin flip: If the coin turned up tails, the world would be destroyed. If it turned up heads, human life would get at least two times better. Bankman-Fried said he would take the bet.
For her services at Alameda, Ellison said she was given large bonuses twice per year, though she never received an equity stake in the hedge fund. (She did receive equity in FTX.) The largest individual bonus amounted to $20 million, she said.
Bankman-Fried, meanwhile, funneled some of his vast wealth into political races, believing that he could garner large amounts of influence through relatively modest donations, she alleged. She recalled him once declaring that he had a five percent chance of one day becoming president.
Kevin O’Brien, a former federal prosecutor, told The Daily Beast that Ellison “may be the most important accomplice witness in the case.”
“She probably has more detail and more knowledge than any of the other accomplices who had a purely business relationship with Mr. Bankman-Fried,” O’Brien said, adding that the romantic dynamics between the two could make her testimony even more compelling to the jury. “This kind of subcurrent of human interest is what feeds their interest in a way that financial transactions often don’t,” he said.
A former Alameda employee told The Daily Beast he wasn’t surprised that Bankman-Fried’s top lieutenant and former lover decided to testify against him.
“Out of that entire inner circle friend group, I think Caroline and [former FTX executive Nishad Singh] might have had the best intentions,” the former employee said, requesting anonymity because of ongoing legal proceedings. “Their crime was playing along for way too long and not speaking up.”
Before she flipped on her former lover in federal court, Ellison was a stereotypical nerd who lived for math competitions and fan fiction. In many ways, her story mirrors Bankman-Fried’s: a preternaturally gifted child raised by two academics—Bankman-Fried’s parents are Stanford law professors, Ellison’s teach economics at MIT—whose intelligence often isolated her from her peers.
Former classmates describe Ellison as quiet and shy, if somewhat aloof. A high school classmate told The Boston Globe that Ellison would leave school early, telling everyone she was going to classes at MIT. (“She wasn’t humble,” the classmate quipped.) At Stanford, where she majored in math, she sailed through her classes with ease, according to former classmates who spoke to Fortune. Her haughtiness continued into higher education—when asked by a Forbes interviewer in 2021 what she hadn’t learned in college that would have helped her later, she replied: "Pretty much everything. Taxes?"
Despite her ego, classmates agree that none of them saw their socially awkward, math-champion peer as a future international scammer. “When I picture her, I still picture Caroline as this petite, reserved, shy girl doing something low-energy or sedentary,” a Stanford classmate told Fortune—not, this classmate added, as “the Elizabeth Holmes of our class year.”
That changed in December, when Ellison pleaded guilty to seven counts in what prosecutors say was a Bankman-Fried-directed scheme to illegally funnel FTX customer money to Alameda.
“He was the one who set up these systems,” she said in court on Tuesday.
According to Lewis’ book, Going Infinite, Ellison’s involvement with the FTX scandal started with, if not a lie, a grave omission. Over coffee in 2017, Bankman-Fried told Ellison he was building an exciting, secretive new trading firm that centered the aims of effective altruism—the niche philosophy to which both subscribed. When she arrived at the hedge fund, having ditched her multimillion-dollar job at a conventional hedge fund, she found a fledgling startup at war over a missing $4 million. According to Lewis, she called her mother crying her very first week.
Alameda eventually bounced back, and Bankman-Fried took a back seat to focus on FTX, naming Ellison the hedge fund’s co-CEO in his wake. By most accounts—including her own—the role did not suit her well. In a Google Doc from April 2022 reviewed by The New York Times, Ellison wrote, in characteristically analytical style: “Running Alameda doesn’t feel like something I’m that **comparatively advantaged at or well suited to do.” In various other documents, she admitted to weaknesses in “leadership” and “decisiveness” and “expressing broad disagreement with people,” particularly men.
The former Alameda employee told The Daily Beast that Ellison was “quiet” and “shy” and “very much not the typical boss person.”
“She didn’t strike me as a person who would enjoy a position of power, maybe even the opposite,” this person said via the messaging app Telegram. “She enjoyed numbers and hard problems, not titles.”
At the same time, Ellison was engaged in an on-and-off romantic relationship with Bankman-Fried—if one can call it that. In an attempt to get her boss to acknowledge their relationship, Ellison sent him a Google Doc about her “pretty strong romantic feelings” for him, diplomatically laying out the pros and cons of the two dating. He responded by telling her that “In a lot of ways I don’t really have a soul” and relocating the entire company to Hong Kong. After yet another of their breakups, in April 2022, Ellison wrote that their relationship had “significantly decreased my excitement about Alameda” because it “felt too associated with you in a way that was painful.”
That fall, Bankman-Fried started talking to employees about shuttering the hedge fund altogether, and he invested $400 million in a different trading company run by another of his exes, according to the Times. He did not tell Ellison.
By November, Bankman-Fried’s true love, FTX, was bankrupt, and some $8 billion of customer funds was missing. In court last week, Bankman-Fried’s lawyers attempted to pin some of the downfall on Ellison, claiming she failed to enact safeguards at Alameda that would have kept it from losing money so quickly. According to prosecutors, however, Ellison acted at the direction of Bankman-Fried, who was still “calling the shots” at Alameda and using his former girlfriend as a “front.”
In December, Ellison became one of the first two employees to flip on Bankman-Fried, pleading guilty to wire fraud, securities and commodities fraud, and money laundering. At a court hearing later that month, Ellison said she knew that what she was doing was wrong, and said she was “truly sorry.”
Former prosecutor Nick Akerman told The Daily Beast it might not matter to jurors that Ellison had already pleaded guilty to multiple crimes.
“The question is not whether you like her,” he said. “The question is whether she’s telling the truth.”
