Alameda Research CEO Caroline Ellison is a math whiz who loves Harry Potter, fringe political philosophy and taking big risks. She can be one in every of the supporting players in Sam Bankman-Fried’s FTX catastrophe.
By David Jeans, Sarah Emerson, Richard Nieva and Michael del Castillo
In 2021, Caroline Ellison, the CEO of Alameda Research who oversaw crypto traders allegedly playing roulette with billions of FTX’s customer funds, was asked if she had any advice for her younger self. Her reply was earnest and transient.
“I might tell her to be less risk-averse and consider in herself more,” she wrote in a previously unpublished application for Forbes’ 30 Under 30 list.
A yr later, that advice reads as a stunningly ironic epitaph for one in every of the largest financial catastrophes in recent memory, one Ellison herself presided over. Last week, FTX, once the second largest crypto exchange on the planet, collapsed right into a $32 billion pile of dangerous bets and worthless tokens that the previous Enron attorney who has taken over FTX said is the largest “failure of corporate controls” he’s seen in his profession. And Alameda, the corporate Ellison helms, was one in every of its architects.
It was Alameda’s speculative investments that were allegedly made through the use of FTX customer deposits, taking billions without users’ knowledge. And it was Alameda that reportedly covered up the scheme since the hedge fund ensured the assets it was trading on FTX steered clear of its own balance sheet. In a bankruptcy filing, FTX estimates it would have multiple million creditors in search of damages — FTX’s rank and file, who reportedly were convinced to pour their life savings into the platform, amongst them. The filings also show that Alameda Research handed out three personal loans to FTX executives, with Bankman-Fried borrowing $1 billion. And while FTX CEO Sam Bankman-Fried owned 90% of the trading firm, it was Caroline Ellison at Alameda’s helm when each firms collapsed.
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There may be little publicly available details about Ellison, but conversations with eight individuals who knew her, and a previously unpublished interview she gave to Forbes last October, paint a rough picture of a quiet math nerd who climbed the crypto hierarchy until all of it went bust. Over the course of just a few years, Ellison’s wholehearted embrace of Bankman-Fried’s “latest jazz” financial hijinks pitched her into an ever-widening crypto gyre of bullshit, deceit and desperation. She didn’t reply to multiple comment requests for this story.
“There are a variety of people who find themselves very smart, but aren’t good, necessarily, on the messy world of trading—especially crypto.”
Before she found herself at the middle of crypto’s most massive meltdown, Caroline Ellison was a star student. She was a Harry Potterhead. She was a camp counselor. She was a author of live motion role playing scenes. Ruth Ackerman, a math professor who taught Ellison at Stanford 10 years ago, called her former student “shiny, focused, very mathy” — a challenge, she said, to reconcile with Ellison becoming wrapped up in one in every of the most important alleged frauds of the past decade.
“The primary I heard of the present controversy was when people began contacting me on LinkedIn, telling me to withdraw my endorsement of her skill as a pc scientist,” Ackerman told Forbes.
Now, because the life-savings obliterating carnage of FTX’s collapse comes into clearer focus, and multiple U.S. agencies — including the Securities and Exchange Commission and the Department of Justice — have announced investigations, Ellison seems headed towards a nadir that belies her pedigree and the experiences of people that knew her in a past life, a risk taken and gone catastrophically bad.
“Being comfortable with risk may be very vital,” Ellison said on a podcast in May. “There are a variety of people who find themselves very smart, but aren’t good, necessarily, on the messy world of trading—especially crypto.”
“Their whole goal was to maximise wealth,” an early Alameda worker said. “They never lived in a world where they weren’t risking quite a bit.”
In March 2018, Caroline Ellison was working on the quant-trading firm Jane Street when one in every of her former colleagues approached her with a proposition that may change her life.
Over coffee in California, Sam Bankman-Fried, a disarmingly aloof crypto entrepreneur, pitched her about joining Alameda Research, a latest digital currency hedge fund he was working on that may exploit the differences in pricing for Bitcoin in numerous countries. It was the proper arbitrage, he said. The exchange would help him toward his goal of “earning to present” billions to charity.
“I used to be like, wow, that sounds pretty exciting. I mean, I actually love Jane Street,” Ellison told Forbes in a previously unpublished interview in October 2021. “It was a extremely hard decision to go away.”
But Ellison did leave, abandoning her cushy job for a gig at a crypto Icarus that got here crashing down in spectacular fashion last week. Behind each Alameda and FTX was Bankman-Fried, a bloviating then-billionaire founder, who had founded the FTX two years after Alameda to construct what he considered a contemporary cryptocurrency exchange. When Bankman-Fried decided to step away from Alameda to focus full-time on the fast-growing FTX, Ellison, a quiet and quirky child of MIT economics professors, took over as co-CEO.
As FTX cartoonishly imploded, going from “Assets are effective” tweets to bankruptcy in 4 days, attention turned to Alameda’s $10 billion in assets and its alleged practice of funneling FTX’s customer deposits to speculate in dangerous speculative bets. Multiple crypto firms once seen as industry pillars at the moment are on the verge of the identical fate. While the day by day headlines document years of alleged wrongdoing, the highlight has broadened beyond Bankman-Fried to his inner circle, and landed on Ellison, a rare female leader in a male dominated industry.
“Their whole goal was to maximise wealth,” an early Alameda worker said. “They never lived in a world where they weren’t risking quite a bit.”
In recent days, Ellison has faced a barrage of particularly nasty criticism from crypto boosters who blame her for overseeing the downfall of Alameda. But amid the vitriol she has found some defenders in an unlikely group of people that have celebrated the musings about race science and imperialism on a blog she allegedly wrote in college. A few of her defenders, who call her “Queen Caroline,” are followers of Curtis Yarvin, a neoreactionary political theorist and much right darling. Lots of the individuals who have flocked to Ellison’s defense gather on Urbit, a peer-to-peer platform created by Yarvin, one in every of her online supporters told Forbes. They think Ellison was set as much as be the autumn person, and claim that former co-CEO Sam Trabucco, who they derisively call “Sam Tabasco,” is behind Alameda’s implosion. Trabucco didn’t reply to multiple requests for comment.
“I definitely think she’s innocent,” one said. “I feel Caroline may be saved.”
“This was very very like, oh, yeah, we don’t really know what we’re doing,”
The daughter of esteemed economists — her father, Glenn Ellison, is currently the top of economics on the Massachusetts Institute of Technology, and her mother, Sara Fischer Ellison, is an economics department lecturer on the university — she grew up outside of Boston, in a household full of numbers. While other kids were twiddling with Lego, Ellison was learning about Bayesian statistics before middle school; one yr, quite than write her father a birthday card, she presented him with an economic study of stuffed animal prices at Toys ‘R’ Us. “We definitely got exposed to a variety of economics,” Ellison previously told Forbes in an interview.
A natural mathematician, highschool was a laboratory for Ellison’s love of numbers and she or he competed multiple times within the Math Prize for Girls, the national contest that attracts the country’s brightest young minds. But her interests went far beyond math, and as a senior, she received an honorable mention in a linguistics olympiad. She also loved books—her parents read her the primary Harry Potter book when she was 3, she said, then she read the second on her own at age 5. (She has apparently described herself as a Ravenclaw.)
By the point Ellison arrived at Stanford as a math major in 2012, her skilled ambitions were taking shape, and while adjusting to varsity life, she took to Tumblr to publish her day by day musings. The now-deleted blog, called WorldOptimization, is unsigned but a detailed associate confirmed that it was hers. In it, she wrote that “the sexual revolution was a mistake” and that she believed “women are higher suited to being homemakers and rearing children than doing Careers.” She also mused about race science, in a single post saying the “genetic differences there are massive” with regards to Indian people from different provinces and castes — which has develop into a source of discrimination in Silicon Valley. And at the highest of her list of “~cute boy things~” was “controlling most major world governments.”
Ellison has since downplayed what she took away from college. Last yr, when asked by Forbes about one thing she didn’t learn there that may have helped her in the true world, she replied, “Just about the whole lot. Taxes?”
One thing she did pick up: an affinity for a philosophy called effective altruism. Popular in Silicon Valley, the movement calls on people to make use of data to maximise their efforts to have a positive impact on the world. It was pioneered by a bunch of philosophers that included Will MacAskill, who Bankman-Fried says convinced him to get wealthy for good — and who would later join the philanthropic arm of FTX, Future Fund, before resigning last week. At Stanford, Ellison joined the effective altruism club on campus and have become its vp.
Doubt now has emerged over whether Ellison, Bankman-Fried or their compatriots actually believed within the tenets of effective altruism, or if it served as an efficient technique to shield their alleged wrongdoing. In text messages published by Vox on Wednesday, a reporter asked Bankman-Fried if his discuss ethics was “mostly a front.” His response: “yeah.” Ellison at one point, perhaps in a moment of sardonic self-awareness, appeared to have renamed her blog “Fake Charity Nerd Girl.”
“It’s pretty nice for us to have two individuals who can take ultimate responsibility for things.”
After Stanford, Ellison became a trader at Jane Street, where she met Bankman-Fried. They bonded over their mutual interest in effective altruism. “They were very much into [Effective Altruism], a variety of people at Jane Street were, and that was typical,” said Tom Gill, a former trader at Jane Street who worked with Ellison and Bankman-Fried. “The concept was that the very best thing for the world is for me to develop into extremely wealthy, after which donate it…it’s incredibly self-serving.”
After Bankman-Fried convinced her to leap ship for Alameda in 2018, Ellison realized she’d arrived at a haphazard startup. “This was very very like, oh, yeah, we don’t really know what we’re doing,” Ellison told Forbes. There, she also met Bankman-Fried’s confidants Nishad Singh, Gary Wang, and shortly after, Sam Trabucco, each of whom would take executive roles alongside Bankman-Fried. They, too, shared a quiet bond over their interest in effective altruism.
At the top of 2018, Bankman-Fried moved the corporate’s headquarters from Berkeley, California to Hong Kong. The town’s favorable regulatory environment, and presence of other major crypto firms like Binance and Crypto.com, meant Alameda needed to be there, Bankman-Fried reasoned, in line with an early worker. The team ping-ponged between half a dozen WeWorks across town for the subsequent few months, including one office rented solely for the aim of stockpiling beanbags. Within the largely male-dominated office, one worker recalled Ellison watching the royal wedding of Prince Harry and Meghan Markle with glee, while her colleagues were absorbed within the video game League of Legends.
But Bankman-Fried’s next act was already underway, and he launched FTX in 2019 because of initial funding from Binance. Short for “Futures Exchange,” the genesis of FTX was a type of Alameda skunkworks “crazy side project,” Ellison told Forbes. With him tending to his latest exchange — and rapidly becoming referred to as a crypto czar — Ellison rose on the trading firm, becoming co-CEO of Alameda alongside Trabucco in the summertime of 2021. Trading around $5 billion a day, the role pushed Ellison to the forefront of the industry.
Soon after, Ellison and Trabucco were featured on the Forbes 30 Under 30 list. “It’s pretty nice,” she said in an interview on the time, “for us to have two individuals who can take ultimate responsibility for things.”
“I feel I’ve partly just gotten fairly lucky.”
Over the past two weeks, much has been speculated in regards to the romantic ties between Ellison and Bankman-Fried, which Bankman-Fried confirmed by telling the Recent York Times that the 2 were not involved. A CoinDesk report claimed that Ellison had serially dated Bankman-Fried, and alleged that each were amongst a bunch of 10 roommates who’d been intimately involved in some unspecified time in the future. The precise contours of the pairings are unknown, but public Venmo transactions between Nishad Singh, Sam Trabucco, and FTX chief of brand name and folks Cindy Watanabe show them paying each other for domestic trappings like “kale,” gas and laundry.
Years earlier, Ellison had apparently written on Tumblr, with indeterminate seriousness, that after exploring polyamory, she believed that “everyone must have a rating of their partners, people should know where they fall on the rating, and there needs to be vicious power struggles for the upper ranks” — a dynamic she equated to a “imperial Chinese harem.”
As murky because the executives’ relationships were with one another, so was the connection between Alameda and FTX, which rapidly overshadowed its sister company. Bankman-Fried courted investors Sequoia, NEA and Lightspeed Enterprise Partners, and FTX customer deposits soared with greater than 1,000,000 users. But even investors were sometimes at the hours of darkness about Alameda’s role.
As Alameda faded into the background, Ellison became virtually invisible, in line with people working at FTX and at firms that transacted with the exchange and Alameda. The CEO of 1 project that received funding from Alameda told Forbes they never interacted together with her, despite the trading firm’s investment. “She signed off on the agreement though,” they recalled. And, for probably the most part, Ellison seemed joyful to stay behind the scenes — existing to the skin world as a blurry Twitter avatar and the handle @carolinecapital.
Ellison found herself in sole control of Alameda when Trabucco stepped down as co-CEO in April, months before he publicly announced his departure in August, in line with a former Alameda worker. On Twitter. Trabucco said the role was “exhausting and consuming” and he had recently been “probably not working in any respect.” The previous Susquehanna trader, who graduated from MIT a yr after Bankman-Fried, said he was leaving after having “significantly reduced” his role over the past few months. “It has been an incredibly formative experience working with @AlamedaTrabucco,” Ellison tweeted on the time. “I hope he has an incredible time on his boat!”
A couple of months later, the whole lot began to crumble. Last week, Binance CEO Changpeng Zhao announced his company would acquire FTX, rescuing it from a liquidity crisis. But Binance quickly backed out of the deal after due diligence, citing “mishandled customer funds and alleged U.S. agency investigations.” Within the space of just a few days, Bankman-Fried’s empire faced a surprising collapse, and a number of other of his entities petitioned for bankruptcy, including Alameda.
Now, the Justice Department and SEC, together with local authorities within the Bahamas, are investigating the situation. Questions are swirling about how Alameda lost all the shopper funds that FTX allegedly transferred so as to prop up the floundering firm. Bankman-Fried’s lavish Bahamian penthouse is reportedly up on the market for $40 million. And Ellison, once a background figure within the outsize shadow of Sam Bankman-Fried, has risen to her own level of infamy.
Rumors are swirling online that Ellison is planning to flee Hong Kong for Dubai, which doesn’t have an extradition treaty with the U.S., but her whereabouts are currently unknown. Her last public statement was a pair of tweets on November 6, defending criticism of the corporate’s balance sheet.
Six months ago, during an interview with crypto podcast El Momento, Ellison was asked if she could return in time, would she “make any type of changes?” On the time, the so-called crypto winter had begun to have a chilling effect on many firms and markets, but FTX was still solvent.
“I’d definitely keep the identical thing. I mean, I feel I’ve partly just gotten fairly lucky,” she said, laughing. “I do not think if I went back and selected a distinct random path, it might have worked out this well.”
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Correction: A previous version of this text misattributed a quote about “genetic differences between groups of humans” to Caroline Ellison.