Editor’s note, September 24, 2024: On Tuesday, Caroline Ellison was sentenced to two years in prison for her role in the collapse of cryptocurrency exchange FTX. Judge Lewis Kaplan cited Ellison’s “very very substantial cooperation” in the 2023 trial of FTX cofounder Sam Bankman-Fried as a factor in her sentencing. Her part in the trial and cooperation with the court is detailed in the piece below.
If you don’t want to be the traffic, you have to beat the traffic, which is why last Tuesday, I hopped in a taxi at the truly zesty time of 4:40 a.m. and headed to the Daniel Patrick Moynihan United States Courthouse in Lower Manhattan. My top basic objective? Snagging one of about 21 first come, first served seats allotted to the press and general public in the trial of crypto founder-hustler Sam Bankman-Fried, who was charged in December with misappropriating billions of dollars in customer funds from FTX, the exchange he created in 2019. And my biggest hope? To watch trader turned CEO turned government-cooperating witness Caroline Ellison testify against Bankman-Fried, her longtime on-again, off-again friendboss with benefits.
I wasn’t alone in my curiosity. Despite the hour, I wasn’t the first or even the second person in line. And unsurprisingly, the queue grew and grew behind me. Last November, I’d gaped along with the rest of the lookie-loos as, all at once, Bankman-Fried’s palatial Bahamas-based nü-finance empire crashed in on itself like a house of cards. At one point, the valuation of his FTX exchange had been as high as $32 billion; at one point, his prop trading firm, Alameda Research, had a reputation for being the kind of place that could deploy several billions of its dollars toward a trade or an investment on a whim.
By November, though—after questionable balance sheets were leaked and a rival decided to relish the opportunity for chaos—market participants got rightly spooked and pulled money from both enterprises. Everything collapsed into bankruptcy. And then the criminal charges came.
Prosecutors say that Bankman-Fried and his closest associates defrauded, and conspired to defraud, customers, investors, and lenders alike through both the misuse of FTX customer assets and the misreporting of Alameda’s balance sheet. If convicted on all counts, SBF could potentially face more than 100 years in prison. Over the winter, a handful of Bankman-Fried’s inner circle made cooperation agreements with the government and pleaded guilty to similar charges. That group included Gary Wang and Nishad Singh, two top deputies who had both known Bankman-Fried since well before he was a household name.
It also included Ellison, Bankman-Fried’s ex-girlfriend and the former Alameda Research CEO, who over the years has left an intriguing digital paper trail while also cutting a distinctive figure in the crypto space. I wanted to see her myself, in hopes that I could glean some insight into how two such proudly futuristic young people, and others around them, got caught up in such a fundamentally old-timey racket.
In March 2021, just about five years after she’d graduated with a math degree from Stanford, Ellison created a Twitter account with the name @carolinecapital and mused about the latest book she was vibing with. “Reading Reminisces [sic] of a Stock Operator and it’s disturbingly relatable,” she wrote. Working at Alameda Research, the ambitious and cutthroat prop trading firm founded by Bankman-Fried in 2017, Ellison was reaching new and challenging echelons of professional financial success. And she found herself connecting with some of Reminiscences of a Stock Operator’s themes—even though, or perhaps because, the book was nearly a century old.
“‘For years I had been the victim of an unfortunate combination of inexperience, youth, and insufficient capital,’” Ellison tweeted, quoting one of the book’s timeless lines. “Same tbh,” she added.
Little did Ellison know that at the time, just about everything—for both the crypto industry and her employer—was about as good as it was going to get. Cryptocurrency prices and trading volumes were rising toward all-time highs. She and Bankman-Fried were back in their on-again relationship era (albeit not for long). FTX, which shared space with Alameda both in the office and in Bankman-Fried’s brain, was seemingly thriving: expanding rapidly from the still-nascent world of crypto into the established cultural mainstream.
That April, FTX inked a 19-year, $135 million arena naming rights deal with Miami-Dade County and the Miami Heat, and a few months later, MLB officials began sporting FTX patches on their shirts. That June, the likes of Tom Brady and Gisele Bundchen signed on to endorse the exchange. Another stadium naming deal was being ironed out at Cal, and so on. And that October, Bankman-Fried named Ellison (with whom he was then off-again, again) one of two co-CEOs of Alameda Research.
This was a big job she would hold for a little more than a year until early November 2022, when it came to light that Alameda had long been accessing, lending against, and even speculatively investing FTX customer funds. Or—as Ellison described it, with her characteristic nervous-giggle bluntness during an employee all-hands meeting that month in the Hong Kong office—“FTX basically always allowed Alameda to, like, borrow user funds.”
It was around that time that I first came across Ellison’s Twitter account. I also saw some copy-pasted Wayback Machine snippets from her Tumblr, which was variously named “worldoptimization” and “Fake Charity Nerd Girl.” There were posts about Taylor Swiftology and “cute boy things” she liked in a man (sample cute boy things: “controlling most major world governments” and “low risk aversion”), and there were steely theories, drawn from the effective altruism movement she had joined while at Stanford, about morality and malaria.
At first, the FTX crash had stuck out to me as noteworthy because of the sheer magnitude of its numbers—some $8 billion missing, just like that—and the arcane, of-the-moment nature of the crypto world in which it took place. But the more the people involved came into view, the more it seemed like this wasn’t the usual financial scandal populated by a bunch of greedy guys in suits. No—this was a financial scandal populated by a greedy guy in a stained gray T-shirt and a girl he first met when she was dressed as a “sultry wood nymph” and on her way to LARP. And furthermore, far from being some hyper-sophisticated, hard-to-parse scheme, it was a pretty simple premise: turn on the faucet and drink from those FTX customer funds.
Ellison was no victim in this; she pleaded guilty to two counts of fraud and five counts of conspiracy and said, on the stand, that she did things like give her parents a $100,000 loan. But that didn’t mean she wasn’t also in thrall to the man at the helm. A passage from Reminiscences of a Stock Operator describes the type well.
“A man cannot be convinced against his own convictions, but he can be talked into a state of uncertainty and indecision, which is even worse,” writes the author. “Once I accepted his facts it was a cinch that my own conclusions, derived from his facts, would agree with his own.” Sounds familiar.
Over the first couple of weeks of testimony in the SBF trial, jurors have heard from Bankman-Fried’s former friends, subordinates, conspirators, and even lovers. Ellison represents all of the above. When she first entered the courtroom last week, all assembled all turned in our pews and watched her walk down the aisle. She looked exactly like herself, if not more so: slight frame, center-parted long curls, thick glasses, a shifting posture that was part doubt, part defiance.
But Bankman-Fried, these days, looks a little bit different. He has gotten a haircut—not a major one, but different enough that you can’t spot his coif in a crowd the way you once could. He has lost weight in his Brooklyn detention center, where he was sent in August after violating the terms of his house arrest in Palo Alto by, among other things, possibly leaking portions of Ellison’s private Google Doc to-do lists and diary entries to The New York Times. And because of the narrow layout of the courtroom, Bankman-Fried isn’t sitting up front, where you’d imagine a defendant to be, but kind of smack-dab in the middle of the place.
Which is why, when Ellison was asked to identify SBF and point to him at the start of her testimony … she couldn’t find the guy. Assistant U.S. attorney Danielle Sassoon encouraged her to stand up if she needed to. She did, and it still didn’t work, and the tension in the air was so thick that I contemplated standing up and pointing myself and being held in contempt. When she finally found him, she was asked to state for the record what the defendant was wearing. Of all the answers she’d been practicing with the government in preparation for this day, this probably hadn’t been one of them. “He’s over there, wearing … a … suit?” she ventured, with a little bit of a squeak that paradoxically made her sound wholly human.
Ellison testified for only a couple of hours on that Tuesday afternoon, and much of the time was spent going line by line through spreadsheets that she said reflected some of the balance sheet doctoring she did at the direction of Bankman-Fried. But one of the most lasting exchanges came just a few minutes in:
Q. While you dated, what, if anything, did the defendant tell you about his professional goals?
A. He was very ambitious. He talked about wanting Alameda and eventually FTX to be successful and to end up being huge companies that did a wide variety of things. He was also very interested in politics and talked about wanting to use his money to have influence on politics. He said at one point he thought there was a 5 percent chance he would become president someday.
Q. When you say president, what are you referring to?
A. Of the United States.
It was a perfect encapsulation of the defendant, gift wrapped for the jury: cutting, telling, digestible, overarching, easy to remember. And that was just the beginning.
In her direct examination on Wednesday, Ellison got intensely personal and also went mega-global. She spoke of the way working with and for Bankman-Fried while also dating him was a difficult cycle that wended its way into professional doubt and around back again. “If I messed something up at work and Sam gave me negative feedback on that, that would affect our personal relationship as well and sort of vice versa,” she told the court. (It was nothing she hadn’t told Bankman-Fried directly before: In Going Infinite, Michael Lewis’s new biography of the defendant, there are numerous reproductions of notes she wrote that said all these things.)
Such a dynamic was simple to envision, given that a day earlier, during the cross-examination of Gary Wang, the defense had exhibited a memo in which Bankman-Fried wrote to other colleagues that the culture at Alameda Research was “mediocre at best” and that Ellison was “not a natural leader, and probably never will be.” At the same time, Wang’s testimony also made Ellison’s loyalty to Bankman-Fried feel less lovelorn: After all, she wasn’t the only one doing Bankman-Fried’s bidding, not when Wang was shown to have been out there cosigning all sorts of eight-figure loans, at the behest of SBF, without really asking why.
For much of Wednesday, Sassoon coolly led Ellison through direct questioning, starting with more spreadsheets. Ellison interpreted entries like “P(can’t meet that)=100” for the jury: “This is the probability that we would be unable to repay our loans.”
The spreadsheets eventually gave way to a cache of other communications. We saw a Google Docs list of “Things Sam Is Freaking Out About,” which included line items like “reddit” and “getting regulators to crack down on [rival firm] Binance.” (We saw a lot of lists of stuff and things and idk; my favorite entry in the genre was a spreadsheet line item where Ellison wrote: “Oops this seems like not a thing we should be counting?”) We saw group chats involving angry lenders. We saw group chats that included Joseph Bankman, SBF’s extremely involved dad. In one, Ellison workshopped what to say to her employees once all the shit went down.
The courtroom buzzed as Ellison detailed a round-the-world whirlwind of money and power, saying or reading aloud the phrases “Saudi prince” (referring to Mohammed bin Salman, whom she said Bankman-Fried tried to sell desperate equity to), “bribe to Chinese government officials” (a sum that she pegged at more than $100 million, delivered in hopes of getting back $1 billion of overseas assets that had been frozen, and that she marked on a spreadsheet as “the thing”), “Thai prostitutes” (a resource that she said Bankman-Fried tried deploying—unsuccessfully—for the same unfreeze-the-money objective), and “Michael Lewis is going to be in the Bahamas” (to report on the book that would become Going Infinite).
In one powerful moment, Ellison described Bankman-Fried’s guiding utilitarian framework, one in which all that mattered was doing “whatever would maximize utility—so essentially trying to create the greatest good for the greatest number of people or beings.”
Q. What did he say about how lying or stealing fit into that?
A. He said he didn’t think rules like don’t lie or don’t steal fit into that framework.
Q. How, if at all, did the defendant’s expressed attitude about lying and stealing affect you?
A. I think it made me more willing to do things like [sic] and steal over time. When I started working at Alameda, I don’t think I would have believed if you told me that a few years later I would be sending false balance sheets to our lenders or taking customer money, but over time it was something that I became more comfortable with when I was working there.
Eventually, Ellison described what it was like for everything—the secrets, the markets, all of it—to come tumbling down. Prosecutors put a text message exchange between her and Sam on the screen, one in which she tells him that she’s actually feeling kind of … great?
Q: At this point in time were you aware of the shortfall in customer funds on the FTX exchange?
A. Yes, I was.
Q. In light of that, why are you saying that this is the best mood you’ve been in in a year?
A. I mean, yeah. To be clear, that was overall the worst week of my life. I had a lot of mood swings during that week and a lot of different feelings. But one of the feelings I had was an overwhelming feeling of relief because, as I said, this had been something that I had been dreading for so long, for the past several months. It’s something that had been in my mind every day, worrying about what would happen when the truth finally came out. And I felt a sense of relief that I didn’t have to lie anymore …
At this point, the judge’s deputy handed her some tissues. The multiple courtroom sketch artists rushed to update their drawings to include one of the star witnesses holding a Kleenex up to her face. (One of the artists is best known for her renderings of Donald Trump and Tom Brady.) The prosecutor’s mother sat proudly in the gallery, watching her daughter’s masterful work. The courtroom was silent and still.
Thursday’s cross-examination of Ellison had all the makings of a similarly big day in court. She was the rare witness who knew Bankman-Fried on both personal and professional levels, and it seemed as though she was crucial to one of the defense’s key arguments, as laid out in its opening remarks: that Bankman-Fried had entrusted her to lead Alameda Research, and that it was her failure to put on defensive hedges in advance of market downturns that ultimately exacerbated the firm’s financial problems. In pretrial motions, the defense had also raised the possibility that it might bring up the topic of drug use, which suggested that perhaps tweets like this one would wind up being entered into evidence:
But instead of being one for the books, it was the kind of day in which I wrote, in my notebook, things like “lots of people shifting around” (during a dull line of questions about loan agreements that culminated in nothing) and “multiple jurors asleep” (during a discussion that actually was about the hedging strategy, but that felt like too little, too late). If the prosecution’s direct examination had sounded like the insistent hammering of the phrase “FTX customer funds,” the cross-examination’s sonic landscape was mostly just a low-energy Mark Cohen saying, “fair enough,” while changing the subject.
The whole thing was odd, filled with confusing exchanges about account names, randomly abandoned lines of inquiry, and one misplaced crescendo about crushing the competition that made sense to journalists who knew the ins and outs of Bankman-Fried’s other romantic relationships but absolutely did not land with the jury.
And by the end of the week, jurors weren’t the only ones who were wondering when the defense would make it make sense. Lately, many observers from both inside and outside the courtroom have asked the same question: What is the defense team doing? Even the most charitable assessments of its performance over the first couple of weeks of the trial—There are so many limitations about what they are allowed to ask about on cross-examination! Their side of the case hasn’t even gotten started yet! They’re purposely getting simple facts like names and numbers wrong in hopes that they’ll trip up the witness!—feel like cope, particularly when the defense has yet to demonstrate any particular competence in this courtroom.
On the first day that the defense cross-examined a witness, for example, SBF’s mother reportedly looked as though she might cry in the gallery. On Thursday, following Ellison’s uneventful cross-examination, the defense tried and failed to block the prosecution from playing audio footage of Ellison’s admission to the Hong Kong office, in November 2022, that Bankman-Fried had authorized Alameda’s access to FTX customer funds. Not only did the audio clips perk up the jury after a dull morning, but they also enhanced Ellison’s credibility, proving that she’d already been tying Bankman-Fried to the fraud before she first began speaking to the government about a cooperation agreement.
Throughout the trial so far, the defense has called so many sidebars—and has been admonished by the judge so many times for doing so—that some members of the jury have started kind of chuckling knowingly each time it happens. Surely not a great sign. And worse, sometimes it’s the witnesses doing the scolding. Last Friday, near the end of a half-day court session, the defense methodically interrogated a witness named Zac Prince, the CEO of the now-bankrupt lender BlockFi, about a proposed loan to Alameda. The line of questioning seemed designed to be a gotcha, a way to get Prince to admit that his company made risky decisions too, that sometimes businesses lose money, that none of this rises to the level of criminality.
Instead, Prince informed Cohen that, ah, he had the wrong loan document: that the one they’d just spent many questions picking through had, indeed, been turned down. One more own goal, just in time for the weekend.
Among reporters chatting about the trial in the courthouse cafeteria, one of the most frequent topics of conversation is whether Bankman-Fried himself will take the stand. In more Ellisonian terms, we used our lunch break to calculate the current value for P(SamTest). And as the defense has floundered, this initially unlikely probability has climbed higher.
It continued to on Sunday night, when the defense filed a letter to the judge about Bankman-Fried’s prescription access, noting that “as we approach the defense case and the critical decision of whether Mr. Bankman-Fried will testify, the defense has a growing concern that because of Mr. Bankman-Fried’s lack of access to Adderall he has not been able to concentrate at the level he ordinarily would.” (The letter was also notable for another reason: It’s far from the first time that Bankman-Fried’s ADHD diagnosis and treatment have come up in court, suggesting that perhaps this is the kind of wedge some future appeal could be based on.)
It’s a long shot that testifying would help SBF—but long shots are what Bankman-Fried has always been all about.
After all, as Ellison told the jury—and as Bankman-Fried has explained himself in the past—he has a different risk profile than most people. Ellison said Sam had once claimed that “he would be happy to flip a coin, if it came up tails and the world was destroyed—as long as, if it came up heads, the world would be, like, more than twice as good.” When you’re assigning your own odds to everything, you can make them look however you like.
With Ellison’s testimony behind us, and with Bankman-Fried’s participation still uncertain, there are a number of other witnesses expected to take the stand this week. They include FTX customers and law enforcement—and the most anticipated remaining person to take the stand for the prosecution: Nishad Singh, another 20-something member of Bankman-Fried’s inner circle and a guy who had his name on all sorts of shady things, by design. Like the pieces of code that enabled Alameda to bypass internal controls and tap into FTX customer funds. Or the multiple political donations that Bankman-Fried’s family members suggested Singh ought to make as they sought to deepen their own channels of political power.
In April 2021, Bankman-Fried’s mother, Barbara Fried, emailed him and Singh to strategize about the best way to move $1 million into the operating budget of her political action committee, Mind the Gap. (The email was reproduced in a separate lawsuit filed by the FTX bankruptcy team against Bankman-Fried’s parents.) “I’m assuming that Nishad would be the better person to have his name on [the donation],” she wrote about Singh, who was a childhood friend of Sam’s little brother, Gabe. “We’d have a slight preference for that on our end, now that my connection to Sam is publicly known, because we don’t want to create the impression that funding MTG is a family affair.”
In August of the following year, Fried again reminded her son to be mindful of creating the wrong paper trails with his donations, noting that one solution was to “substitute someone else’s name.” But “I’m skeptical how long that will help,” she wrote. “One of these days soon, some reporter is going to think to look more closely at FEC reports.” Or, she warned, “even worse, suggest you are using Nishad/Caroline as fronts.” When Sam agreed to structure things however she wanted, his mother wrote back: “You are a prince.” Which would, of course, make her some kind of queen.
But Bankman-Fried isn’t really the type to romanticize royalty; he spent too much time doing figures in his head to ever settle for being a figurehead. That’s not to say that he doesn’t recognize the importance of image and optics; in this trial, we’ve learned that he put a lot of thought into presenting a certain version of himself. But his ambition was always less about smiling during ribbon cuttings and more about using his access to them to suss out where they keep those giant scissors and all the other levers of power.
It was ever thus. When I looked up the century-old Reminiscences of a Stock Operator after reading Ellison’s tweets about it, I learned that the book’s protagonist was based on a guy named Jesse Livermore, who, amid all sorts of stock market triumphs and shenanigans over the years, once cornered the market for cotton so thoroughly and successfully that no less than Woodrow Wilson gave him a call to convince him to ease off a bit. A scene in another book about Livermore, called Jesse Livermore: World’s Greatest Stock Trader, depicts how that conversation went:
“Let me ask you a question, Mr. Livermore, a question that has my full interest.”
“Yes sir,” I said, and waited.
“Why? Why did you corner the cotton market?”
“To see if I could, Mr. President.”
“You cornered the entire United States cotton market, to see if you could, Mr. Livermore?” the secretary of agriculture blurted.
“Yes sir. It got out of hand a little at first, and then I wanted to see if I could do it, that’s all.”
Reading that last line, I wonder whether Ellison, knowing what she does now, might find that kind of motivation “disturbingly relatable,” too. Sam, tbh, I can imagine her playfully tweeting in some other reality, in some exponentially growing universe in which even a few of those high-stakes coin tosses along the way had landed on the other side.
