Her testimony follows that of two different Bankman-Fried confidants and prime lieutenants who advised jurors final week that the chief orchestrated an unlimited fraud on prospects of FTX, his crypto buying and selling platform. Adam Yedidia, a school buddy of Bankman-Fried’s who joined FTX as a software program developer, stated he resigned after he caught wind of the conduct as the corporate unraveled. And Gary Wang, who, like Ellison, has pleaded responsible to committing monetary crimes as FTX’s chief expertise officer, testified that Bankman-Fried stole $8 billion from prospects and publicly lied about it.
Ellison pleaded responsible in December to seven counts, together with wire fraud and securities fraud, and agreed to cooperate with prosecutors in expectation of receiving a lighter sentence. She stated she participated within the scheme that’s central to prosecutors’ case, defrauding FTX prospects by utilizing their funds to repay money owed owed by Bankman-Fried’s hedge fund, Alameda Research.
“I am truly sorry for what I did,” Ellison stated in December in federal court docket in Manhattan as she entered her plea of responsible. “I knew that it was wrong.”
Bankman-Fried faces sweeping allegations that he plundered billions of {dollars} of FTX buyer funds with out their data to make dangerous investments, purchase luxurious actual property, difficulty big loans to his internal circle and donate tens of thousands and thousands of {dollars} to Democratic and Republican politicians.
If convicted, he might serve a long time in jail. He has pleaded not responsible.
Prosecutors argue that Ellison was instrumental in Bankman-Fried’s alleged crimes. Nathan Rehn, the assistant U.S. lawyer who delivered the federal government’s opening assertion final week, stated Bankman-Fried put in Ellison as a “front” atop Alameda whereas he continued to name the pictures behind the scenes.
Defense attorneys for Bankman-Fried offered a distinct model of occasions. They forged Ellison as partly accountable for the crypto corporations’ implosion by failing to heed a warning from Bankman-Fried to place Alameda for a possible downturn within the worth of crypto property.
As a witness, the Stanford-educated mathematician brings a mixture of private {and professional} perception into Bankman-Fried’s conduct, former federal prosecutor Adam Kamenstein stated.
“She’s going to establish that not only did Sam operationally know what was going on but that he was lying about it,” Kamenstein stated. “It’s going to be game over.”
Bankman-Fried and Ellison met after they each labored at Jane Street Capital, a proprietary funding agency in New York City. Bankman-Fried stop in 2017 to discovered Alameda, recruiting Ellison to affix him the next 12 months. He promoted her to co-chief government of the agency in 2021, and later, sole CEO, whereas he continued to personal a majority of the fund.
But Ellison had deep misgivings about her talents as a frontrunner — anxiousness that was compounded by her on-again, off-again romantic relationship with Bankman-Fried, in response to personal writings that Bankman-Fried later leaked to the New York Times. That leak led Judge Lewis A. Kaplan to revoke the bail that had allowed Bankman-Fried to stay underneath home arrest in his mother and father’ residence in Palo Alto, Calif. He has been held since in a Brooklyn jail.
In her plea look, Ellison stated she had recognized since 2019 that Alameda had “backdoor” entry to FTX buyer funds, successfully giving the agency an “unlimited line of credit without being required to post collateral.”
She additionally mentioned Alameda’s quite a few massive and dangerous bets in enterprise offers in addition to private loans to FTX executives, saying these have been financed with loans from exterior lenders “worth several billion dollars.” When these collectors recalled their cash, Bankman-Fried and his workforce tapped FTX buyer funds to pay them again, she stated.
Ellison stated she labored with Bankman-Fried and others to deceive Alameda’s lenders about its soundness, together with by doctoring some monetary statements. And at Bankman-Fried’s path, she labored secretly to inflate the market worth of FTT — a cryptocurrency issued by FTX and utilized by Alameda to prop up its steadiness sheet — to enhance the looks of the agency’s monetary well being to these lenders, prosecutors say.
Throughout her time there, Ellison stored detailed data of the state of the enterprise and the efforts of Bankman-Fried and his closest advisers to handle because the enterprise started deteriorating amid a wider crypto business downturn in 2022.
She “took notes at meetings with her co-conspirators at which they discussed, among other things, the financial health of Alameda and its liabilities to FTX,” prosecutors wrote in an August court docket submitting outlining the proof they plan to make use of on the trial. Her data included an inventory titled “Things Sam is Freaking Out About,” which named Alameda’s buying and selling positions, unhealthy press in regards to the entanglement between FTX and Alameda, and fundraising, in response to the submitting.
Ellison additionally is probably going to offer a window into the swift collapse of the enterprise in early November. As FTX confronted a solvency disaster, with a cascade of shoppers making an attempt to drag their deposits and the rival alternate Binance exploring a short-lived bid for the corporate, Ellison gathered Alameda staff to supply a tearful clarification, in response to a recording of the assembly obtained by prosecutors.
Alameda “ended up borrowing a bunch of funds on FTX” to repay its collectors,” she stated. “I guess, mostly I wanna say, like, I’m sorry. This really sucks.”
Asked by an worker who had made the decision to take FTX buyer cash, she stated, “Um … Sam, I guess.”