First they were colleagues on a trading floor in New York. Then they were friends running a start-up together in Hong Kong. Eventually they became partners in a turbulent office romance chronicled in tabloid headlines around the world.
On Tuesday, in a packed Manhattan courtroom, the relationship between Sam Bankman-Fried and Caroline Ellison took another turn. The two faced each other for the first time since the cryptocurrency trading companies they built together, FTX and Alameda Research, collapsed in November.
Ms. Ellison, 28, took the stand on the fifth day of Mr. Bankman-Fried’s trial on conspiracy and fraud charges stemming from FTX’s implosion. She began by taking more than 10 seconds to identify Mr. Bankman-Fried when a prosecutor asked her to point him out.
Then over roughly 15 minutes of initial testimony, Ms. Ellison repeatedly blamed Mr. Bankman-Fried, 31, for crimes that led to FTX’s implosion. She testified that he instructed her to draw from FTX customer funds to finance venture investments and loan repayments by Alameda Research, a crypto hedge fund that she oversaw for him. She said Alameda took around $14 billion, only some of which it was able to repay.
“He directed me to commit these crimes,” Ms. Ellison said, as Mr. Bankman-Fried sat across the room flanked by his lawyers.
As the government’s star witness — and by far Mr. Bankman-Fried’s most widely discussed associate — Ms. Ellison is a key figure in the trial and her testimony was a highly anticipated moment.
She is regarded as a chief accomplice to Mr. Bankman-Fried, who became a symbol of hubris and dangerous risk taking across the cryptocurrency industry after he was charged last year with masterminding a sweeping conspiracy to steal billions of dollars in deposits from FTX’s customers. Her romantic relationship with Mr. Bankman-Fried, whom she dated on and off, gave her unique access to the FTX founder as he built his crypto empire.
In December, Ms. Ellison pleaded guilty to fraud and conspiracy. She joined two other former FTX executives — Gary Wang and Nishad Singh — in agreeing to cooperate with the prosecutors pursuing Mr. Bankman-Fried. A fourth former top executive, Ryan Salame, also pleaded guilty but is not cooperating with the authorities.
Mr. Bankman-Fried has pleaded not guilty. He could receive what would amount to a life sentence if convicted.
As the criminal investigation unfolded over the past year, Mr. Bankman-Fried turned Ms. Ellison into an important element of his defense. He has argued that she ignored his instructions and made mistakes in managing Alameda that contributed to FTX’s failure.
A few weeks before the trial, Mr. Bankman-Fried had his bail revoked and was sent to jail after a judge ruled that he had tried to intimidate Ms. Ellison by leaking her private writings to The New York Times.
In her testimony on Tuesday, Ms. Ellison explained her history with Mr. Bankman-Fried. She also delved into the details of their relationship, often in highly personal terms.
The pair met more than five years ago at the New York trading firm Jane Street, where Mr. Bankman-Fried worked after college. They bonded over a shared commitment to effective altruism, a philanthropic movement popular in tech circles, and eventually became romantically involved. They also dated for “a couple of years,” Ms. Ellison testified.
In 2018, she joined Mr. Bankman-Fried at Alameda, where she worked as a trader and was then promoted to chief executive.
Shortly after starting at Alameda, Ms. Ellison testified that she realized the company “was in much worse shape” than Mr. Bankman-Fried had conveyed to her. The firm had suffered large losses and was desperate for new sources of capital, she said.
She said Mr. Bankman-Fried was “very ambitious,” telling her he wanted his companies to be successful and that there was “a 5 percent chance” that he would become president of the United States.
Ms. Ellison eventually moved with Mr. Bankman-Fried from Alameda’s original headquarters in the San Francisco Bay Area to Hong Kong, and then later to the Bahamas, where FTX and Alameda were based when they imploded.
Mr. Bankman-Fried and Ms. Ellison lived together in a luxurious penthouse on the Bahamian island of New Providence, along with eight other friends and executives, including Mr. Wang and Mr. Singh.
When prosecutors questioned Ms. Ellison about her relationship with Mr. Bankman-Fried, Ms. Ellison’s voice became softer. She described how she had little power in the relationship.
“He was the person I reported to,” she said of Mr. Bankman-Fried. “He owned the company and he set my compensation and had the ability to fire me.”
Ms. Ellison said dating “created some awkward situations” because Mr. Bankman-Fried was her boss. She said she ultimately broke up with him because “he often felt distant or not paying attention to me.”
She recounted several times where she questioned the use of FTX’s customer funds to pay lenders or make investments, but said Mr. Bankman-Fried reassured her that it was the right move.
“As a trader, I was a customer on exchanges and if I knew this was happening at another exchange I would be uncomfortable leaving money there,” Ms. Ellison said.
Ms. Ellison also testified that she was troubled with some of the ways FTX and Alameda treated FTT, the exchange’s digital coin that was created by Mr. Bankman-Fried. FTT was an important source of currency for FTX and Alameda, as it was used as collateral for getting loans and it made FTX appear to be a more valuable company than it was.
When FTX collapsed, so did the price of FTT, leaving some of the exchange’s customers and Alameda lenders with large losses.
Ms. Ellison said FTT was included on Alameda’s balance sheet, a practice that artificially inflated the value of the trading fund — especially as FTT’s value came largely from Alameda’s own trading in it. She added that she thought what she did was misleading, but “Sam directed me to do it.”
This is a developing news story. Stay tuned for updates.
