The trial of FTX founder Sam Bankman-Fried took a star turn Tuesday as his former fellow top executive, Caroline Ellison, began testifying against him, immediately blaming her former boyfriend for directing her to commit crimes before his cryptocurrency empire collapsed last November.
Ellison’s highly anticipated turn on the witness stand in Manhattan federal court took place just moments before the trial broke for lunch.
When she was asked to identify Bankman-Fried in the courtroom, Ellison stood at the witness stand as she scanned the courtroom for a long minute, at first unable to find him, before gesturing his way with a flip of her hand and saying he was “over there wearing a suit.”
Bankman-Fried's appearance has changed dramatically in recent months as he has lost weight and trimmed his well-known wild coif into a tightly cropped look more traditional in the world of finance.
In the trial's second week, Ellison said she committed fraud, conspiracy to commit fraud and money laundering along with Bankman-Fried and others.
Asked by a prosecutor about Bankman-Fried's involvement, she said: “He directed me to commit these crimes.”
Bankman-Fried could face decades in prison if he is convicted of charges lodged against him when he was brought to the United States from the Bahamas last December. He has pleaded not guilty.
Bankman-Fried, 31, was one of the world’s wealthiest people on paper, with an estimated net worth of $32 billion, when his cryptocurrency businesses collapsed as investors and customers sought to empty their accounts last November. Bankruptcy proceedings followed as prosecutors alleged that stolen funds were used to fund his businesses, make donations and contribute to political campaigns in the hopes of influencing cryptocurrency regulation in Washington.
At one time, FTX was the second-largest cryptocurrency exchange in the world.
Ellison testified under a cooperation deal that could win her leniency when she is sentenced. It could also be pivotal when the jury decides whether Bankman-Fried is guilty of fraud charges among seven counts in an indictment against him.
Bankman-Fried has been jailed since August, when Judge Lewis A. Kaplan concluded that he had tried to influence Ellison and other potential trial witnesses and could no longer be trusted to await trial under a $250 million bond and confinement to his parent's Palo Alto, California, home.
As Ellison testified, several of her friends or online fans were in attendance at the courthouse. In an overflow courtroom where spectators could watch proceedings on a television monitor, some of them, smiles on their faces, rushed toward a screen to see her up close.
Ellison seemed composed, answering questions posed by Assistant U.S. Attorney Danielle Sassoon.
At the outset, Sassoon asked her how she knew the defendant. She said she met him at Jane Street, a hedge fund, where she worked as an intern before joining his company after he formed Alameda Research in 2017.
She then volunteered that they had “dated a couple years.”
Eventually, Bankman-Fried installed Ellison as chief executive at Alameda.
Ellison said Bankman-Fried set up systems that enabled Alameda to withdrawal unlimited sums of money from FTX accounts and he “directed us to take FTX money to repay our loans.”
She said Alameda eventually withdrew up to $14 billion from FTX, although some of it was paid back.
Ellison's testimony immediately followed two days of testimony from Gary Wang, an FTX cofounder and another key figure in Bankman-Fried's inner circle. He also testified under a plea agreement with prosecutors that he was directed by the defendant to set up software loopholes that allowed Alameda to drain FTX accounts of unlimited funds.
