A Conversation between Bankman-Fried and Ellison About the Balance Sheet at Alameda, and What he Meant About His Career at the Tevatron
She was stressed, Ellison said, and detailed how she conferred with Bankman-Fried about the balance sheet at Alameda, noting growing problems with the company’s ability to pay back loans.
She described her role as frustrating, even though she was the CEO. She did not receive a raise when she was promoted, but Bankman-Fried continued to make important decisions even after he moved to FTX.
The problem wasn’t the math at all. It was that Ellison’s calculations assumed Alameda could borrow $1.8 billion in normal dollars and $1.5 billion in crypto from FTX. The spreadsheet makes this clear with a row labeled “FTX borrows,” which Ellison said were customer funds.
Bankman- Fried owned a lot of the Sam coins as well as FTT, which was one of the nickname for them. The value of the coins was almost certainly less than what was on the balance sheet, since trying to sell them all at once would make them less valuable. Bankman-Fried directed her to put those coins on the balance sheets Alameda showed to lenders, even though she felt it was “somewhat misleading.”
The credit line was used for trading and was taken in intervals of $100,000 to $10 million at a time. Ellison said that using the funds allowed them to make profitable trades.
Ellison had a more personal relationship with Bankman-Fried. (A juror who’d been asleep for a discussion of the FTT token woke up when she started discussing it.) The two have been sleeping together for a while. She was a trader while Bankman- Fried was the CEO. They didn’t date until later — twice. Their first relationship stretched from the summer of 2020 through the summer of 2021; they agreed to keep it secret. Some people found out, which is normal. They lived together again in the fall of 2021.
That gave Ellison an unusual view of his character. “He was very ambitious,” she said. Besides telling her about his presidential chances, he also told her that if there was a coin flip where tails destroyed the world and heads made the world twice as good, he’d flip the coin. He called this being “risk-neutral,” which seems like a fancy way of saying he was a gambling addict.
Ellison told that Alameda was troubled from the beginning. “Shortly after I started, I learned the company was in worse shape than I realized,” Ellison said. Alameda was initially funded with loans from friends, but those loans were recalled a few weeks after she arrived. According to Michael Lewis’s Going Infinite, there was a staff revolt at Alameda Research over lost millions and financial chaos. Ellison asked Bankman-Fried why he hadn’t shared the company’s shaky circumstances in the job offer. “He hadn’t known how to tell me,” she said.
She listed off the crimes she’d already pleaded guilty to, and added that Bankman-Fried “directed me to commit these crimes,” Ellison said. If you were wondering, fraud and conspiracy to commit fraud are related. “We ultimately took about $14 billion, some of which we were not able to pay back.” She lifted her head when she had answered the questions.
When the prosecution asked Ellison if she could identify Sam Bankman-Fried for the jury, Ellison stood and squinted, and scanned the room. It took almost a minute for her to locate him.
But by the end of the day, that all seemed like a sideshow. Bankman-Fried had been vibrating slightly during Wang’s testimony. During Ellison’s testimony, his bouncing became more noticeable.
Wang didn’t help himself out either. In the past, Wang had said in interviews that he didn’t believe in market making. I say that because Everdell was likely giving him his previous testimony to refresh his recollection, but Wang was not sure he remembered. Whatever Wang was seen wasn’t submitted as evidence to the court. The jury probably did the most strong work for the defense so far.
Last week Wang testified that Alameda got access to a special credit line and an option to take its balance into the negative without triggering liquidation — something he alleged other accounts at FTX didn’t get. The spot margin program, which enables users to lend one another assets for margin trading, was being tried to undermine by Everdell. There is a chance to have a negative balance in a coin. It was not, however, possible for those accounts to avoid liquidation, as Wang testified Alameda could do — or to have an overall negative balance. But I’m betting the defense is hoping the jurors will throw up their hands in confusion thinking about this.
The day started off promisingly for the defense as it cross-examined Gary Wang, the chief technology officer of FTX and co-owner of both FTX and Alameda. Christian Everdell, one of Bankman-Fried’s defense attorneys, couldn’t undo the damage of last week’s code review. But he managed to shake the rust off long enough to make Wang sound less reliable, drowning the jury in confusing technicalities.
I’ve got some shitty ex-boyfriends, but none of them made me the CEO of their sin-eater hedge fund while refusing to give me equity and bragging about how there was a 5 percent chance they’d become the President of the United States, you know? Absolutely counting my blessings after Caroline Ellison’s first day on the stand. How many of the other jurors are doing the same thing?
Caroline Ellison, the former girlfriend of Sam Bankman-Fried and a top executive in his crypto business empire, has long loomed as the government’s star witness in the ongoing trial of the disgraced founder of FTX.
For months, Bankman-Fried tried a variety of ways to regain access to those assets. Ellison testified how colleagues at Alameda set up accounts on the Chinese exchange tied to the identities of Thai prostitutes, hoping they could somehow use them to siphon the money away from the frozen account.
Bankman-Fried’s ex-girlfriend had intimate knowledge of both the company and the celebrity who faces seven criminal charges that could send him to prison for the rest of his life.
The transfer of funds as legitimate loans has been defended by Bankman-Fried’s lawyers, but prosecutors argue that the money was used to plug financial holes at Alameda, make speculative investments and finance Bankman- Fried’s lavish lifestyle.
An M.I.T. Judge’s View of Bankman-Fried and Alameda on a Jane Street Meetup
She said that she handled a lot of decisions in Alameda. “But for any major decisions, I would always run them by Sam, and I would always defer to Sam if he thought that we should do something.”
Ellison noted that Bankman- Fried was always in control of the power dynamic between her and her.
At several times during her testimony, Ellison said Bankman-Fried directed her to manipulate spreadsheets to make Alameda’s financial picture look more favorable and to ignore requests from lenders for additional information.
Ellison said that Bankman- Friedrich talked a lot about how he could raise more money from investors and lenders.
She said Bankman-Fried talked repeatedly about trying to get money from Mohammed bin Salman, the Crown Prince of Saudi Arabia. She detailed that the plan was to use funds from Saudi Arabia to repay Alameda’s loans. But that funding never materialized.
By the fall of 2022, Ellison said, she and other executives at the company were holding onto hope, however blindly, that they could secure additional financing from someone, or that the price of cryptocurrencies would go up. That, she said, would lift up the value of the assets on Alameda’s books.
Ellison said Alameda transferred $100 million to the Chinese government in order to unfreeze the account, which could constitute a bribe.
Ellison described a meeting in which a colleague whose father worked for the Chinese government protested repeatedly. Bankman-Fried yelled at the employee to shut up, according to Ellison.
The testimony could be used to demonstrate the trust and confidence Ellison and Bankman-Fried had in each other, according to Judge Lewis Kaplan.
But Kaplan also made clear to jurors that an allegation of bribing a foreign official is not one of the charges in this trial. But at a separate trial, expected to take place next year, Bankman-Fried will face charges of bribery and bank fraud.
After the prosecutor called her to testify, everyone stood up and faced the two wooden doors at the back of the courtroom. Ellison was led down the aisle to the witness stand.
Ellison, daughter of M.I.T. economists, told her story of how she and Bankman-Fried met at Jane Street in her testimony. She was an intern, and he was a trader.
In 2018, she and Bankman-Fried “started sleeping together on and off,” Ellison told the court. We started a romantic relationship in the summer of 2020.
“Heroes and villains”, a counselor’s counsel for survivors of the Holocaust, and a conspiracy of which she admitted to being an integral part
Over the course of hours of testimony, she described in detail personal and professional ups and downs, and the conspiracy of which she has admitted to being an integral part.
