The second week of the high-profile criminal trial of FTX founder Sam Bankman-Fried was filled with insight into his private life provided by those closest to him, including a friend he met at math camp and his former girlfriend, Caroline Ellison.
Ellison climbed the corporate ladder quickly to become CEO of Alameda Research, the cryptocurrency hedge fund Bankman-Fried owned. Her explosive testimony took place over three days and included a look at the comically wild schemes hatched by Bankman-Fried and other top executives to keep the companies solvent, which included bribing Chinese officials and Thai prostitutes.
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Ellison also pulled back the curtain on the personal grooming habits and sloppy dress code of her former boyfriend, which she claimed was part of a carefully crafted public relations strategy to make the 31-year-old billionaire seem more approachable.
Three members of Bankman-Fried’s inner circle have testified against him so far. They include Adam Yedidia, a college friend who went to work for him at FTX; FTX co-founder Gary Wang; and Ellison. Nishad Singh, a childhood friend of Bankman-Fried’s younger brother Gabe, is also expected to take the stand.
Bankman-Fried is accused by the government of orchestrating one of the biggest frauds in U.S. history by illegally diverting billions of dollars from client accounts for his personal use, which included making risky trades at his cryptocurrency hedge fund. He’s also accused of making illegal donations to lawmakers on Capitol Hill and their affiliated political action committees as part of a plan to buy power and influence regulation.
His lawyers have described him as an inexperienced businessman operating in the Wild West of cryptocurrency, where the trading was fast and laws were loose.
Bankman-Fried, an MIT graduate, was sharing a penthouse in the Bahamas with his friends and Ellison when his glamorous life came crashing down last year. He has pleaded not guilty to seven charges, including wire fraud, money laundering, and multiple conspiracy counts. If he’s found guilty, he could be facing a 100-plus-year sentence.
Here’s a look at what happened during week two of his criminal trial:
Gary Wang, FTX CTO
Wang, who met Bankman-Fried at math camp, finished up his testimony on Tuesday. He, Singh, and Bankman-Fried founded FTX in 2019.
Wang was asked by Bankman-Fried’s lawyers about a September 2022 memo that Bankman-Fried sent before the collapse of FTX, in which he considered shutting down Alameda Research after learning that Bloomberg was going to publish a story about the too-close-for-comfort ties between Alameda and FTX.
In the memo, Bankman-Fried knocked Ellison and claimed she was “not a natural leader, and probably never will be.” In the same memo, he blamed Ellison and Alameda for not hedging more, which he claimed led to the downfall of both companies.
Wang testified he did not know about Alameda’s hedging process.
The Securities and Exchange Commission has claimed Wang was a willing partner in Bankman-Fried’s scheme to bilk customers and investors out of billions of dollars.
Wang created the software that allowed the diversion of funds to take place. At his plea hearing in December 2022, Wang, FTX’s chief coder, pleaded guilty to wire fraud and three conspiracy counts of wire and securities fraud.
He’s also facing civil fraud charges from the SEC and Commodity Futures Trading Commission.
Caroline Ellison, former Alameda CEO and ex-girlfriend of Bankman-Fried
Prosecutors called Ellison, widely considered to be Bankman-Fried’s chief accomplice as well as the star witness for the government, to the stand on Tuesday.
Over the course of three days, which included five hours of cross-examination, the former CEO and one-time love interest of Bankman-Fried repeatedly blamed him for masterminding a scheme that siphoned $10 billion in customer funds from FTX to boost Alameda. She told jurors that Bankman-Fried should be held accountable for the crimes that led to FTX’s spectacular implosion.
Her testimony also provided insight into the tangled relationship between the hedge fund Bankman-Fried owned and she ran and FTX, the cryptocurrency exchange he co-founded. Ellison provided details of their love affair, the power dynamics in the office, and the sophomoric ideas Bankman-Fried and his executives floated for ways to get back $1 billion in funds that China had frozen.
Ellison testified that she, Bankman-Fried, Wang, Singh, FTX Chief Operating Officer Constance Wang, and two other employees held multiple meetings about how to unfreeze the funds. One of the ways included using an employee’s father, a Chinese government official, to see if he could use his influence to get it done. When that didn’t work, Alameda hired a lawyer to work with the Chinese government, but that, too, was futile.
Another idea was to hire Thai prostitutes and use their accounts to arrange trades with Alameda that they knew would be bad and, therefore would transfer value away from Alameda’s accounts and to the sex workers, Ellison said. Alameda would then reclaim the assets from the Thai prostitutes through non-frozen accounts.
Ellison told jurors she lied to her employees about the illegal payout because she “didn’t want the facts of our crimes to get out.”
On her second day on the stand, she claimed Bankman-Fried’s brown frizzy hair, cargo shorts, and untucked T-shirt were all part of a highly choreographed plan to make himself look more like an effective altruist and less like a billionaire braggart.
Bankman-Fried, who debuted on the Forbes billionaires list in 2021 and was estimated to be worth $26 billion, also ditched his luxury car in favor of a Toyota Corolla and set up a Twitter account in an effort to make himself seem more down-to-earth.
“He thought his hair was very valuable,” Ellison testified, adding that Bankman-Fried claimed he’d gotten bigger bonuses while working at the Wall Street trading firm Jane Street because of his hair and felt the unkempt look was “essential to his image.”
Bankman-Fried’s lawyer, Mark Cohen, tried to paint Ellison as a woman who was inherently bad at her job and refused to leave because of her personal entanglements with Bankman-Fried. He implied that her heartbreak over her romantic fallout with Bankman-Fried caused her to make bad business decisions, which ultimately led to Alameda and FTX’s downfall.
Zac Prince, CEO at defunct crypto lender BlockFi
The criminal trial pivoted Friday from personal to professional.
Zac Prince testified about BlockFi’s relationship with FTX and Alameda. The company was a lender to Alameda and a client of FTX and had about $1 billion in total exposure to the two companies, Prince claimed, adding that their downfall led to his.
“I don’t think BlockFi would’ve filed for bankruptcy in November 2022 if the Alameda loans were still in good standing and the funds on FTX were there,” he said.
BlockFi was among several companies caught up in the rush of withdrawal requests.
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The government is trying to portray Prince and his company as victims of Bankman-Fried’s alleged illegal deeds. They want to show that BlockFi made loans to Alameda based on doctored balance sheets that Ellison claimed Bankman-Fried ordered her to create.
The defense is trying to show jurors that BlockFi’s bankruptcy had more to do with the high-risk world of crypto and less with Bankman-Fried’s alleged actions.
