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Legal proceedings involving former FTX CEO Sam Bankman-Fried took a new twist after prosecutors revealed their intention to use personal notes and diary entries by Caroline Ellison, the former CEO of FTX's sister trading firm Alameda Research, as evidence against him in the criminal trial.
In an August 14 filing with the U.S. District Court for the Southern District of New York, prosecutors outlined that they plan to present a collection of Ellison's personal to-do lists and notes during her spell at Alameda's helm
“The Government intends to offer into evidence certain handwritten and typed notes that Ellison maintained to keep track of the conspiracy’s activities,” reads the filing. “For example, Ellison took notes at meetings with her co-conspirators at which they discussed, among other things, the financial health of Alameda and its liabilities to FTX.”
The prosecutors pointed specifically to a list titled “Things Sam is Freaking Out About,” which summarizes conversations between Bankman-Fried and Ellison regarding various aspects of SBF’s business concerns, including fundraising activities, trading hedges, as well as negative press surrounding the connection between Alameda and FTX.
These notes, the prosecution argues, “are not inadmissible hearsay” as the former Alameda CEO took them “to memorialize information supplied to [her]…and to provide a reference to help…carry out [her] role in the conspiracy.”
Last month, the U.S. Department of Justice (DOJ) asked a federal judge to issue an order restraining SBF and other involved parties from making statements that could potentially interfere with a fair trial. The move followed the publication of a New York Times article that unveiled personal Google documents written by Ellison.
At a bail hearing last week, Judge Kaplan, however, decided that a gag order preventing SBF from talking to the media would be insufficient, sending the disgraced crypto mogul to jail.
The former CEO of Alameda was previously in romantic relations with SBF and is set to be a key witness in the FTX former boss' trial in October.
Ellison’s personal notes also offer insights into the day-to-day operations of what prosecutors allege were fraudulent activities at FTX.
Ellison admits shortfall in user funds
These include a recording of Ellison from an all-hands meeting on November 9, 2022, just two days before FTX and Alameda filed for bankruptcy.
During that meeting that was “covertly recorded by an Alameda employee,” Ellison offered explanations about the liquidity crisis faced by FTX at the time.
According to Ellison, Alameda was borrowing “a bunch of money via open-term loans and used that to make various illiquid investments,” with most of those loans called during the crypto crash of 2022.
“In order to, like, meet those loan recalls, we ended up borrowing a bunch of funds on FTX which led to FTX having a shortfall in user funds,” Ellison said at the meeting.
The filing further indicates that Ellison held discussions on the matter with SBF, as well as with the exchange’s co-founder and CTO Nishad Singh, as well as its director of engineering Gary Wang.
When asked by an Alameda employee about who was responsible for the decision on using user deposits, Ellison answered: “Um . . . Sam, I guess.”
Singh and Wang have both pleaded guilty to fraud charges and are cooperating with prosecutors.
Bankman-Fried's lawyers have responded to the prosecution's motion, moving to exclude any evidence gathered after July 1. They argue that prosecutors failed to provide specific information in a timely manner, “substantially” hindering SBF’s ability to prepare his defense.