Caroline Ellison, former chief executive officer of Alameda Research LLC, arrives to court in Recent York, US, on Thursday, Oct. 12, 2023. Ellison, ex-girlfriend of FTX co-founder Sam Bankman-Fried, outlined for a Recent York jury Wednesday how she worked with Sam Bankman-Fried to deceive lenders and customers to construct his multi-billion dollar cryptocurrency empire, and their failed attempts to stop a spectacular collapse. Photographer: Stephanie Keith/Bloomberg via Getty Images
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Caroline Ellison, the federal government’s star witness in its fraud case against FTX founder Sam Bankman-Fried, took the stand for cross-examination on Thursday morning because the trial continued in a courthouse in downtown Manhattan.
Ellison was CEO of Bankman-Fried’s hedge fund, Alameda Research, and in addition dated him on and off while working for him. She pleaded guilty in December to 2 counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering. A part of the 28-year-old’s plea cope with the federal government has involved cooperating with the prosecution’s case against Bankman-Fried.
On Thursday morning, Ellison faced aggressive questioning from Bankman-Fried’s lawyer, Mark Cohen, who spoke over her several times as she tried to testify. But Judge Lewis Kaplan also appeared annoyed on the indisputable fact that Cohen requested two sidebar conferences early on to pursue lines of questioning.
Ellison mostly avoided eye contact with the defendant, as she has through the past two days of testimony, staring down at her hands in between questions and regularly flipping her hair over her left shoulder.
She did look towards Bankman-Fried when the lawyers were discussing legal matters on the bench. Nonetheless, Bankman-Fried stared away, with hands clenched. After that glance, she made no eye contact.
During Cohen’s cross-examination, Bankman-Fried was either facing forward along with his hands clenched or typing on his laptop. He often looked stunned.
A part of the cross-examination revolved around Sam Trabucco, who was Alameda’s co-CEO with Ellison from October 2021 until August 2022, months before each corporations collapsed out of business as investors raced to withdraw funds from FTX, concerned about customer money getting used to paper over losses at Alameda.
Caroline Ellison is questioned during Sam Bankman-Fried’s fraud trial over the collapse of FTX, the bankrupt cryptocurrency exchange, at Federal Court in Recent York City, U.S., October 11, 2023 on this courtroom sketch.
Jane Rosenberg | Reuters
Ellison testified that she and Trabucco began handling lots of Alameda’s day-to-day business as early as 2020, well before officially taking up, and that there have been periods of time where Bankman-Fried wouldn’t seek advice from them much.
By 2021, she testified, Bankman-Fried had largely stopped coming into the Alameda office and had left more of the job to Ellison. She said that Trabucco was good under pressure and at handling extreme trading situations.
She also testified that the firm had attempted to rent several people to oversee Alameda’s accounting, but all of them left. Ellison took on the role of preparing Alameda’s balance sheets from Ryan Salame, who had been the CEO of a subsidiary called FTX Digital Markets. In previous testimony, Ellison admitted that she had used FTX customer money to pay Alameda’s loans, and alleged she did so at Bankman-Fried’s suggestion.
Ellison also testified that Bankman-Fried had discussed adding a recent co-CEO when Trabucco left, but she resisted.
When Cohen asked if she considered herself an ambitious person, Ellison said she didn’t consider herself as particularly ambitious, but became more so with Bankman-Fried’s encouragement as she worked for him.
During late morning testimony, Cohen jumped around in his timeline and his questions were met with routine objections, a visibly annoyed Judge Kaplan, and requests by Ellison for the defense attorney to repeat what he said. The pace was so slow that some jurors seemed to be nodding off.
Ellison said she considered resigning from Alameda at various points from 2019 to November 2022.
On one in all her Google Docs, Ellison had a piece entitled “limiting aspects in scaling,” which she said referred to things that were keeping Alameda from doing well and making as much money because it could. The primary the she listed was management.
“I feel like neither Trabaucco nor I has been doing a terrific job of pushing on stuff,” she wrote. “We’re within the mode of maintaining established order and attempting to fix problems.”
One other topic within the Google Doc was “hedging” as a top priority. That referred as to if Alameda should go further in hedging its positions, reminiscent of selling crypto and buying Nasdaq futures. Ellison said she was skeptical and didn’t do anything about it. Later that yr, in September 2022, the firm did find yourself selling some bitcoin and ethereum and put several billion dollars into Nasdaq futures, she said.
Regarding the comingling of operations between FTX and Alameda, Ellison admitted that the 2 firms did not have a correct “Chinese wall” separating the companies.
On the subject of her romantic relationship with Bankman-Fried, Ellison said their brekaup within the spring of 2022 affected communications between the 2 of them. They might talk mostly over Signal despite living in the identical apartment, and so they largely avoided one another outside of labor.
One other boyfriend entered the image. On Nov. 16, several days after FTX declared bankruptcy and with Ellison now staying together with her parents within the U.S., 4 our five FBI agents showed up to look the house. Ellison was there and, apparently, so was the home cleaner and her boyfriend.
The boyfriend was not named in court, but Ellison said he had worked at Alameda and FTX and that his laptop was confiscated through the search. Following the raid, Ellison met with prosecutors around 20 times, most recently on Monday to organize for trial.
One issue that arose during a sidebar conversation between the attorneys and the judge involved Bankman-Fried’s fidgeting and the way in which he was reacting during parts of the testimony.
Danielle Sassoon, the assistant U.S. attorney representing the prosecution, told Judge Kaplan that several times “the defendant has laughed, visibly shaken his head, and scoffed,” which she said may very well be having an effect on Ellison “given the history of this relationship, the prior attempts to intimidate her, the ability dynamic, their romantic relationship.”
Cohen responded by calling those claims “ridiculous” and said that any reactions from the defendant are “to your honor and the jury to come to a decision.” He said the federal government was “going out of its strategy to present highly cumulative evidence portraying our — my client as a really dirty person.”
Kaplan said he wasn’t going to make any public comments concerning the disagreement, but asked that Cohen “have a word” with Bankman-Fried, “and if he’s doing anything, it should stop.”
— CNBC’s Dawn Giel and Kate Rooney contributed to this report
WATCH: Sam Bankman-Fried trial continues
