Hot water: Over three days of testimony, Caroline Ellison fried Sam Bankman-Fried. His ex-girlfriend and former Alameda Research front company CEO revealed many unflattering things about SBF's character. More importantly, she relayed information showing that this trial is only the tip of the iceberg of his crimes.
Sam Bankman-Fried's on-again-off-again love interest, Caroline Ellison, pleaded guilty and agreed to become the state's witness in exchange for a lesser sentence. Her testimony started this week, and boy, did she dish.
Ellison's days on the stand gave us a sneak peek into even more lawbreaking that he will ultimately answer for in a second trial scheduled for next year. She described situations that prosecutors can boil down to identity theft, bribery, and fraud against a nation.
In 2021, government officials froze over $1 billion in Alameda funds in Chinese exchanges due to a money laundering investigation. The Washington Post notes that in a desperate attempt to get the money out, SBF used the identities of multiple Thai prostitutes that another FTX executive had given him.
"Bankman-Fried and [I] attempted to trade the funds off frozen accounts using Thai prostitutes' identities, which were provided by Ryan Salame," Ellison said. Salame also copped a plea and is expect to testify for the prosecution.
When that illegal plot failed, SBF approved a $150 million expenditure to bribe Chinese government officials. Axios points out that the international nature of the scheme escalates the crime from routine bribery to violations of the Foreign Corrupt Practices Act. Bankman-Fried will face this and potentially other charges in another hearing slated for April 2024.
The rest of Ellison's testimony mostly pertained to SBF's character. She painted him as what many people already believed him to be – a selfish brat who thinks rules and laws don't apply to him. While it's not illegal to be a dirtbag, attacking his character is integral to the prosecution's strategy. They hope to illustrate that SBF's moral compass was not aligned with conducting legitimate business.
Ellison described SBF as brutally narcissistic. His hair, the butt of many watercooler jokes, was part of a "money-making" persona he was trying to develop. He intentionally let it grow long, bushy, and unkempt to portray a "smart, competent, somewhat eccentric founder."
"He said ever since Jane Street [a hedge fund he and Ellison worked at], he thought he had gotten higher bonuses because of his hair and that it was an important part of FTX's narrative and image," the former exec said. "I would say he looked like he didn't put a lot of effort into his personal appearance. He dressed sort of sloppily and didn't cut his hair often. He said he thought it was better for his image."
Bankman-Fried was also convinced that he would one day be elected President, which caused some confusion in the courtroom.
It seems no one has noticed the MASSIVE FTX TRIAL going on in NYC. FTX appears to have been set up to simply steal and launder investor money. The question is: Who got all the $$$? Tens of billions of $$$ just disappeared overnight. Interesting! https://t.co/yYNpm0dTd3– Jack Breaks Out (@JackBreaksOut) October 11, 2023
"When you say president, what are you referring to?" Assistant US Attorney Danielle Sassoon pressed.
"Of the United States," Ellison responded.
Ellison said that rules like "don't lie" and "don't steal" did not fit into SBF's philosophy. He believed that lying and stealing were justified for the "greater good" – the greater good seemingly being the good of his empire. However, NPR notes that some of his actions were reckless to the point of risking the company.
In 2021, SBF tasked Ellison with running a risk assessment on several startup companies he wanted to invest $3 billion in. Ellison ran the models and found that the speculative bets would put Alameda at substantial risk of being unable to pay creditors if they called in their debts all at once.
Ellison showed SBF her results and advised against making the risky investments. He ordered her to go through with the buys regardless of the risks. According to the Wall Street Journal, this was not a big surprise. Bankman-Fried, on several occasions, said he would risk everything on a coin flip.
"Ellison recalled on the witness stand how Bankman-Fried once spoke of a coin-flip scenario where if the coin landed on tails, the world would end," the Journal writes. "But if the coin landed on heads, 'the world would be twice as good.' Bankman-Fried said he would take the bet if there were a chance of making the world better, Ellison said."
If convicted on all counts in this hearing alone, Sam Bankman-Fried could face over 110 years in prison.