‘I Didn’t Have to Lie Anymore’—FTX Collapse Was a Relief, Says Caroline Ellison

By André Beganski

While much of the jury’s attention has been consumed by alternative balance sheets and to-do lists throughout Caroline Ellison’s testimony, a tissue drawn by the former Alameda Research CEO on Wednesday afternoon represented a break from meticulous answers throughout her time on the stand.

"I was in sort of a constant state of dread," she testified.

Ellison is the government's star witness in its case against Sam Bankman-Fried, founder and former CEO of the once-dominant cryptocurrency exchange FTX. Bankman-Fried faces seven criminal charges related to the collapse of the exchange. He is alleged to have used billions in customer funds to cover up losses incurred by Alameda,  a trading desk he also founded in 2019.

"I knew that we would have to take the money from our FTX line of credit and I knew that that was money that could be called at any time," Ellision testified today. "And every day, I was worrying about the possibility of customer withdrawals from FTX and the possibility of this getting out and what would happen to people that would be hurt by that."

She started crying and her voice quivered while talking about the emotional weight lifted once it was clear that Alameda and FTX would not survive a fatal flurry of customer withdrawals last November. Ellison testified that Bankman-Fried, her boss and on-again-off-again boyfriend, directed her to use FTX customer funds to plug holes in Alameda's balance sheet. The alleged fraud resulted in $8 billion in losses for customers who held cryptocurrency on the exchange.

“I just felt a sense of relief that I didn’t have to lie anymore,” she said between sobs, adding that concern for people who would lose their jobs and customers had heavily burdened her.

A chat between Bankman-Fried and Ellison was shown as evidence not long after. It centered on FTX and Alameda’s final days. The former Alameda CEO told Bankman-Fried that she was in her “best mood” in over a year as both firms went bust.

“Wow … uh … congrats … because shit’s exciting?” Bankman-Fried responded.

Federal prosecutors wrapped up Ellison’s direct testimony with little time left in the day. And after around 15 minutes of cross-examination that centered on the nuances of how Alameda recorded the flow of funds, the government called foul.

“Objection, your honor,” said Assistant U.S. Attorney Danielle Sassoon. “This is confusing.”

Acknowledging that it had been a long day, Judge Lewis Kaplan proposed adjourning for the day around 30 minutes early to nobody’s complaint. The former crypto mogul’s defense team is expected to pick up where it left off tomorrow.