Former CEO of crypto hedge fund Alameda Research, Caroline Ellison, testified in the trial of former FTX CEO Sam Bankman-Fried, revealing that he directed her and others to defraud customers of the FTX exchange. According to Ellison, Bankman-Fried had no qualms about sharing misleading financial information with lenders and grew preoccupied with a rivalry with Binance. Ellison stated that Alameda Research took about $10 billion in FTX customer funds to repay debts and make investments, which they gained through a line of credit and funds deposited by FTX customers into an Alameda bank account. Bankman-Fried is facing fraud charges and has pleaded not guilty.
Caroline Ellison portrayed Sam Bankman-Fried as an ambitious individual who had grand ambitions, including a belief that he could become the President of the United States. Ellison’s testimony in the trial was highly anticipated, as she is one of three former members of Bankman-Fried’s inner circle who have pleaded guilty to fraud charges and agreed to cooperate with the Manhattan U.S. Attorney’s office. Prosecutors allege that Bankman-Fried plundered billions from customer funds to support Alameda Research, buy real estate, and make political donations. Despite his mistakes running FTX, Bankman-Fried denies any intention to steal funds.
During her testimony, Ellison disclosed that Alameda Research used its line of credit from FTX in 2021 to buy back an equity stake held by rival exchange Binance. Bankman-Fried was concerned about potential actions by Binance that could harm FTX and believed it was necessary to buy back the stake. Ellison revealed that Bankman-Fried used $1 billion in FTX customer funds to complete the purchase. Additionally, Ellison shed light on Bankman-Fried’s political ambitions, stating that he saw political donations as a way to amass power and viewed them as a cost-effective method. He donated $10 million to Joe Biden’s presidential campaign.
Overall, Caroline Ellison’s testimony in the trial of Sam Bankman-Fried revealed his alleged involvement in defrauding FTX customers and misusing funds. She described him as an ambitious individual with aspirations for political power and a belief that small amounts of money spent on political donations could yield significant influence. Bankman-Fried has pleaded not guilty to the charges and his defense has suggested that cooperating witnesses like Ellison may be reinterpreting his past decisions in a negative light. The trial, which could last up to six weeks, will continue with the testimony of other witnesses, including former FTX engineering chief Nishad Singh.
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