By Luc Cohen and Jody Godoy
NEW YORK (Reuters) -Caroline Ellison, the previous chief government officer of Sam Bankman-Fried’s hedge fund, testified on Tuesday that the previous crypto mogul directed her and others to defraud prospects of his FTX trade by taking their cash with out their information.
Ellison, who stated she beforehand dated Bankman-Fried, depicted her former boss as an bold younger man who had no qualms about sharing deceptive monetary info with lenders and thought he might someday turn into U.S. president.
Ellison stated the hedge fund, Alameda Analysis, took about $10 billion in FTX buyer funds to repay its money owed and make investments. The fund gained the cash by way of a $65 billion line of credit score it had on the trade, and from funds FTX prospects deposited into an Alameda checking account when FTX lacked its personal account.
“He was the one who arrange these techniques that allowed Alameda to take the cash and he was the one who directed us to take buyer cash to repay our loans,” Ellison stated.
The testimony by Ellison, 28, was keenly awaited. She is one in every of three ex-members of the 31-year-old former billionaire’s interior circle who’ve pleaded responsible to fraud prices and agreed to cooperate with the Manhattan U.S. Legal professional’s workplace.
Prosecutors say Bankman-Fried plundered billions in buyer funds to prop up Alameda, purchase actual property and donate greater than $100 million to U.S. political campaigns earlier than FTX declared chapter in November 2022 following a collapse that shocked monetary markets and left his fame in tatters.
Bankman-Fried has pleaded not responsible to 2 counts of fraud and 5 counts of conspiracy, and has argued that whereas he made errors operating FTX, he by no means meant to steal funds.
In his opening assertion final week, protection lawyer Mark Cohen advised jurors to query whether or not cooperating witnesses like Ellison had been placing a brand new, nefarious spin on outdated selections by Bankman-Fried which they’d initially agreed with.
Gary Wang, FTX’s former expertise chief, testified that Bankman-Fried falsely tweeted that FTX was “fantastic” in November because the trade confronted surging demand for withdrawals. A 3rd cooperating witness, former FTX engineering chief Nishad Singh, can be anticipated to testify on the trial, which might last as long as six weeks.
PRESIDENTIAL AMBITIONS
Ellison testified that she met Bankman-Fried whereas each had been working at Jane Avenue, a Wall Avenue buying and selling agency. Bankman-Fried left in 2017 to discovered Alameda, and Ellison adopted when he supplied her a job as a dealer.
“He was very bold,” Ellison advised the courtroom.
She stated Bankman-Fried considered political donations as a comparatively cheap solution to amass energy, and even believed there was a 5% likelihood he might turn into president himself.
“He stated he thought it was very efficient that you could possibly get very excessive returns when it comes to affect by spending comparatively small quantities of cash,” she stated, including that he had donated $10 million to U.S. President Joe Biden’s marketing campaign.
Cohen in his opening assertion sought to pin among the blame for the collapse of FTX and Alameda onto Ellison, saying Bankman-Fried had advised her to hedge Alameda’s bets however that she didn’t.
In testimony that would undermine that argument, Ellison stated she at all times consulted Bankman-Fried on massive selections and at all times deferred to him.
“He was the individual I formally reported to, he owns the corporate, and he was the one who set my compensation and had the power to fireside me if he wished,” she stated.
Whereas Bankman-Fried has written weblog posts and granted interviews to reporters since his December 2022 arrest, Ellison has maintained a low profile since she pleaded responsible that very same month.
In July, the New York Occasions revealed a narrative citing Ellison’s personal writings from earlier than FTX’s collapse by which she described feeling overwhelmed at work and harm by a breakup with Bankman-Fried. After protection legal professionals acknowledged that Bankman-Fried had shared the writings with a Occasions reporter, U.S. District Choose Lewis Kaplan revoked his $250 million bail and despatched him to jail for possible witness-tampering.
