How Sam Bankman-Fried’s ex-girlfriend and early recruit helped put the FTX founder behind bars for 25 years

In

sentencing
FTX
founder
Sam
Bankman-Fried
to
a
25-year
prison
sentence
on
Thursday,
Judge
Lewis
Kaplan
cited
testimony
from
Caroline
Ellison,
an
ex-girlfriend
of
the
defendant
and
early
recruit
into
his
crypto
enterprise.

“I
keep
coming
back
to
Ms.
Ellison’s
testimony
that
he
knew
it
was
wrong,”
Kaplan
said
at
the
sentencing
hearing
in
downtown
Manhattan.
“He
knew
it
was
criminal.”

Ellison
was
the
star
witness
for
the
Department
of
Justice
in
its
prosecution
of
Bankman-Fried.
She
agreed
to
a
plea
deal
in
December
2022,
a
month
after
FTX
spiraled
into
bankruptcy.

As
part
of
her
testimony
at
the
criminal
trial
late
last
year,
Ellison
supplied
the
government
and
the
jury
with
text
messages,
documents
and
secret
recordings
that
ultimately
helped
lead
to
Bankman-Fried’s
conviction
on
all
seven
charges
against
him.

Manhattan
U.S.
Attorney
Damian
Williams
said
in
a
statement
after
the
sentencing
on
Thursday
that
Bankman-Fried’s
“deliberate
and
ongoing
lies
demonstrated
a
brazen
disregard
for
his
customers’
expectations
and
disrespect
for
the
rule
of
law,
all
so
that
he
could
secretly
use
his
customers’
money
to
expand
his
own
power
and
influence.”

Ellison,
who
ran
FTX’s
sister
hedge
fund
Alameda
Research,
pleaded
guilty
to
two
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.

Though
Ellison
faces
similar
sentencing
guidelines
to
Bankman-Fried,
she’s
expected
to
receive
a
far
more
lenient
sentence
due
to
her
role
as
a
cooperating
witness.

Ellison
jumped
into
Bankman-Fried’s
crypto
orbit
in
2017.

She’d
been
working
as
a
trader
at
Jane
Street,
where
Bankman-Fried
got
his
start
in
finance.
Bankman-Fried
had
reportedly
convinced
the
Stanford
graduate
to
ditch
her
Wall
Street
gig
and
join
Alameda,
when
the
hedge
fund
was
still
in
its
original
Bay
Area
office.

Ellison
spent
years
as
Bankman-Fried’s
on-again,
off-again
girlfriend
and,
at
times,
his
roommate.
She
followed
Bankman-Fried
from
California
to
Hong
Kong
and
ultimately
to

the
Bahamas,
as
Bankman-Fried
repeatedly
shifted
headquarters
for
his
crypto
companies.

Michael
Lewis
wrote
about
Ellison
in
his
book,
“Going
Infinite,”
which
covered
Bankman-Fried’s
rise
and
fall.
In
2021,
Ellison
was
promoted
to
CEO
of
Alameda,
a
job
for
which,
according
to
Lewis’s
reporting,
neither
Ellison
nor
Bankman-Fried
found
her
particularly
well
suited.

“Caroline
sensed
that,
even
as
Sam
promoted
her
to
CEO
of
Alameda
Research,
he
disapproved
of
her
job
performance
—
and
she
shared
his
opinion,”
Lewis
wrote.

Lewis
shared
an
excerpt
from
one
of
the
memos
that
Ellison
had
sent
Bankman-Fried.
“It
feels
like
I’m
doing
a
much
worse
job
managing
Alameda
than
you
would
if
you
were
working
on
it
full-time,”
she
wrote.

In
April
2021,
Ellison
tweeted

about
“regular
amphetamine
use”
in
a
thread
that
also
talked
about
the
“herculean”
effort
it
took
for
her
to
get
off
of
her
couch
and
go
for
a
hike.
 

Court
filings
show
that
Ellison’s

compensation
paled
in
comparison
to
other
top
executives.
Of
the
$3.2
billion
in
payouts
to
the
exchange’s
founders
and
other
senior
employees, FTX’s
head
of
engineering,
Nishad
Singh,
received
$587
million,
co-founder
Gary
Wang
got
$246
million
and
$2.2
billion
went
to
Bankman-Fried.
Ellison
received
$6
million.

Some
of
Ellison’s
private
diary
entries
were
leaked
by
Bankman-Fried
to
The
New
York
Times,
which
published
a

report
about
them
last
July,
months
before
the
trial.
The
act ultimately
landed
Bankman-Fried
back
in
jail after
Kaplan
revoked
his
bail
for
alleged
witness
tampering.

In
a
Google
document
from
February
2022
shared
with
the
Times,
Ellison
wrote,
“I
have
been
feeling
pretty
unhappy
and
overwhelmed
with
my
job.
…
At
the
end
of
the
day
I
can’t
wait
to
go
home
and
turn
off
my
phone
and
have
a
drink
and
get
away
from
it
all.”

She
added,
“It
doesn’t
really
feel
like
there’s
an
end
in
sight.”

But
it
was
in
the
courtroom
that
jurors
got
to
hear
Ellison
for
the
first
time.

U.S.
Attorney
Thane
Rehn
said
during
the
trial
that
Bankman-Fried
“was
using
her
as
a
front”
when
“in
reality,
he
was
still
calling
the
shots
at
Alameda.”
Over
the
course
of
her
multi-day
testimony,
Ellison
helped
prosecutors
build
a
narrative
that
she
was
acting
at
the
direction
of
Bankman-Fried
in
helping
him
steal
customer
money
from
FTX
and
using
it
to
help
prop
up
Alameda,
which
was
suffering
in
the
wake
of
the
crypto
winter.

Ellison
said
Bankman-Fried
was
still
CEO
of
Alameda
when
the
funneling
of
money
began.
She
said
she
was
under
the
impression
that
it
was
FTX
customer
money
because
the
sums
exceeded
the
exchange’s
profits
and
the
amount
of
capital
it
had
raised.

In
mid-2021,
when
FTX
bought
equity
in
the
company
back
from
rival
exchange
and
early
investor Binance,
FTX
used
$1
billion
in
customer
funds
for
the
transaction,
Ellison
testified.

Ellison
said
she
considered
resigning
from
Alameda
at
various
points
from
2019
to
November
2022.

On
one
of
her
Google
Docs,
Ellison
had
a
section
entitled
“limiting
factors
in
scaling,”
which
she
said
referred
to
things
that
were
holding
back
Alameda.
The
first
thing
she
listed
was
management,
including
a
comment
on
her
former
co-CEO
Sam
Trabucco.

“I
feel
like
neither
Trabucco
nor
I
has
been
doing
a
great
job
of
pushing
on
stuff,”
she
wrote.
“We’re
in
the
mode
of
maintaining
status
quo
and
trying
to
fix
problems.”

In
terms
of
the
commingling
of
operations
between
FTX
and
Alameda,
Ellison
admitted
on
the
witness
stand
that
the
two
firms
didn’t
have
a
proper
“Chinese
wall”
separating
the
businesses.

During
her
testimony,
Ellison
mostly
avoided
eye
contact
with
Bankman-Fried,
staring
down
at
her
hands
between
questions
and
frequently
flipping
her
hair
over
her
left
shoulder.
Bankman-Fried
also
often
looked
away,
with
hands
clenched.

Ellison
told
the
jury
that
her
breakup
with
Bankman-Fried
in
the
spring
of
2022
affected
communications
between
the
two
of
them.
They
would
talk
mostly
over
Signal
despite
living
in
the
same
apartment,
and
they
largely
avoided
each
other
outside
of
work.

Danielle
Sassoon,
the
assistant
U.S.
attorney
representing
the
government,
told
Kaplan
several
times
“the
defendant
has
laughed,
visibly
shaken
his
head,
and
scoffed,”
which
she
said
could
be
having
an
effect
on
Ellison
“given
the
history
of
this
relationship,
the
prior
attempts
to
intimidate
her,
the
power
dynamic,
their
romantic
relationship.”

Of
the
hundreds
of
items
entered
into
evidence
during
the
trial,
a
bank
of
messages
on
encrypted
app
Signal
was
among
the
most
calamitous
for
Bankman-Fried.

The
government
presented
a
series
of
Signal
exchanges
involving
Bankman-Fried,
Ellison,
Wang
and
other
top
execs.
In
one
such
exchange,
from
Nov.
8,
2022,
Ellison
appealed
to
Bankman-Fried
and
other
members
of
the
inner
circle,
asking
for
help
on
optics
and
public
messaging.

She
wrote,
“multiple
people
internally
asking
me
whether
they
should
continue
to
make
statements
to
external
parties
like
‘Alameda
is
solvent.’
should
i
suggest
they
stall
instead?
just
stall
on
responding
to
their
messages?
or
what?”

That
day,
FTX
issued
a
pause
on
all
customer
withdrawals.

The
following
day,
Ellison
again
looked
to
the
group
for
guidance
about
how
to
handle
an

all-hands
meeting
for
Alameda’s
roughly
30
employees.

Ellison’s
proposal
was
to
tell
them,
“Alameda
is
probably
going
to
wind
down”
and
that
there
was
“no
pressure”
to
stay
but
help
with
“stuff
like
making
sure
our
lenders
get
paid”
would
be
“super
appreciated.”

Bankman-Fried
suggested
she
say
something
about
there
“being
a
future
of
some
sort
for
those
who
are
excited.”

Ellison
ended
up
divulging
a
lot
more
than
that
in
the
staff
meeting,
a
secret
recording
of
which
was
played
for
the
jury.

“Alameda
borrowed
a
bunch
of
money,”
which
it
used
to
make
investments,
Ellison
said
at
the
meeting.
But
as
crypto
prices
fell,
“FTX
had
a
shortfall
of
user
funds”
and
then
“users
started
withdrawing
their
funds”
and
they
“realized
they
would
not
be
able
to
continue.”

When
she
was
asked
by
a
staffer
whose
idea
it
was
to
plug
Alameda’s
loan
losses
with
FTX
customer
money,
she
said,
“Um,
Sam,
I
guess,”
and
giggled.

“FTX
basically
always
allowed
Alameda
to,
like,
borrow
user
funds,
as
far
as
I
know,”
Ellison
said.