Here are the highlights of former Alameda Research CEO Caroline Ellisons testimony on Tuesday on the first day of the SBFs trial over FTX. Organized and compiled by BlockBeats.
The SBF directed him to commit all crimes
Caroline Ellison was well-prepared in her testimony, and she firmly believed that SBF was complicit in the massive fraud committed by FTX and Alameda Research. When testifying in court, Caroline said: “Alameda took billions of dollars from FTX clients and used them to invest in their own investments. We ended up taking about $14 billion, some of which we were able to repay, and SBF initially It was the CEO of Alameda and the owner of Alameda who directed me to commit these crimes.
Caroline pleaded guilty to seven felonies in December, but at the time the SBF denied all charges against him.
SBF maintains a distance from Alameda externally, but often guides Caroline in decision-making
Consistent with the testimony provided by FTX co-founder Gary Wang, Caroline claimed that SBF was the ultimate decision-maker in the FTX empire. She was fully aware that Alameda was taking FTX customers funds and had an almost unlimited credit line on the cryptocurrency trading platform. Although SBF publicly distanced itself from Alameda and claimed that she did not manage the company, Caroline said that SBF guided her on how to handle the FTT tokens held by Alameda and its venture capital, as well as other important business decisions.
Caroline said: Sam instructed us to borrow as much money as we could and it was something he talked about a lot. Sam had said he wanted to buy more (FTT)... because he didnt want to put any of our loans at risk and put FTT at risk. Placing tokens on the balance sheet can be somewhat misleading.
Additionally, when Alameda was having trouble securing new lenders, Caroline testified, SBF came up with FTT tokens and gave approximately 60-70% of the FTT tokens to Alameda for free. SBF also instructed Caroline to secretly purchase FTT if it fell below $1 (a price he considered a psychologically important point) without discussing the purchase in front of employees. With FTT in the books, Alameda was able to obtain term loans from lenders such as Genesis.
“Alameda borrowed billions of dollars from Genesis using FTT as loan collateral.”
SBF miscalculated market risks and even still wanted to invest heavily
Carolines accusation highlighted the SBFs huge appetite for risk. Caroline said that when the analysis learned of the potential dangers Alameda faced due to outstanding loans from cryptocurrency lender Genesis and possible downturns in crypto assets, SBF often dismissed her concerns and asked her to adjust calculations so that these situations became Easier to accept. She noted that despite the significant risk this poses to Alameda, he still hopes to proceed with the $3 billion venture capital investment.
SBF buys $600 million in Robinhood shares to pay for Alameda
She also provided insight into SBFs purchase of more than $600 million in shares of Robinhood Markets Inc. in May 2022. She said the shares were paid for by Alameda, but when it came time to publicly disclose the purchase, SBF asked that the shares be transferred to another FTX entity because he did not want to be associated with Alameda. The acquisition is yet another sign of Bankman-Frieds continued involvement with Alameda, even though he claims he has little to no connection to the company.
Carolines dual relationship with SBF
The on-again, off-again relationship between SBF and Caroline was also mentioned. She discussed the difficulty of reporting directly to her boyfriend, noting that he could fire her at any time.
He was also my boss at work the whole time we were dating, which created some awkward situations, she said, adding that SBF often seemed distracted and didnt give her enough attention. These personal tensions for Caroline may resurface as her personal diaries fall into prosecutors hands and as her testimony continues.
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Prosecutors also shed light on several surprising claims Caroline made about SBF. Caroline testified that at one point the SBF said there was a 5% chance that he would one day be elected president. (SBF likes to look at the occurrence of things from a probabilistic perspective, and participated in hearings on behalf of the encryption field many times before the FTX thunder)
