Former Alameda Research CEO Caroline Ellison testified in the trial of former FTX Chief Executive Sam Bankman-Fried, who is facing fraud charges related to the bankruptcy of the cryptocurrency exchange. Jurors were played a recording of Ellison telling employees of Alameda Research that Bankman-Fried had approved using customer funds from FTX to pay off the hedge fund’s loans. Ellison stated that “with crypto being down… most of Alameda’s loans got called” and they resorted to borrowing funds from FTX to meet those loan recalls.
When questioned about who specifically authorized the use of customer funds, Ellison responded, “Sam… I guess.” Prosecutors played the audio clips during the testimony of a former Alameda trader. Ellison, who is also Bankman-Fried’s former girlfriend and confidant, finished her testimony on the seventh day of the trial, detailing her role in the alleged multibillion-dollar fraud orchestrated by Bankman-Fried at FTX and Alameda. Both companies are now bankrupt.
Prosecutors claim that Bankman-Fried used billions of dollars from FTX customer funds to support Alameda, make real estate investments, and donate to US political campaigns. Bankman-Fried has pleaded not guilty to the charges of fraud and conspiracy, stating that while he made mistakes in running FTX, he did not intend to steal funds.
During her testimony, Ellison revealed that Alameda took $10 billion in FTX customer funds to repay debts and make investments. Defense lawyer Mark Cohen questioned Ellison about her knowledge of an investigation into FTX before the “all hands” meeting, to which she said she did not recall learning about it. This could undermine the defense’s argument that Ellison tailored her testimony to implicate Bankman-Fried to secure leniency for herself.
In cross-examination, Cohen attempted to show that Ellison ran Alameda with less risk appetite than Bankman-Fried. Ellison admitted to becoming more ambitious after joining Alameda and oversaw various aspects of the firm’s operations but ultimately deferred to Bankman-Fried’s judgment.
The trial, expected to last up to six weeks, will continue with further testimonies from cooperating witnesses and former FTX executives.