Caroline Ellison, the former CEO of Alameda Research and star witness of the ongoing trial, testified on Tuesday that she committed fraud under her then-boyfriend SBF’s direction.
At the start of the second week of the SBF trial, Caroline was questioned by prosecutors about her involvement as the CEO of Alameda. She said that “I sent balance sheets at the direction of Sam” which made investors believe that Alameda’s balance was less risky.
The testimony from the ex-girlfriend of Sam Bankman-fried was much anticipated while she pleaded guilty to fraud and conspiracy charges last year over her alleged role in Alameda’s fall.
She also testified that Alameda took funds from FTX in order to make investments in different ventures. SBF said to use FTX funds but keep them on the FTX exchange to meet customer withdrawal requests, Caroline said.
While some of the funds were actually used for investments, a lot of money from the fund was loaned to Sam’s friends. According to Caroline, other millions went to political donations as Sam believed that it was a highly effective strategy for gaining political influence for the sustainability of FTX exchange.
Even being the CEO of Alameda Research, she had to report to Sam Bankman-fried despite him stepping back from the Alameda. “I would always ultimately defer to Sam,” Caroine exclaimed. She did not have any equity in Alameda despite asking for it, although she was granted silver equity in FTX.
“Sam was directing us to borrow as much money as possible,” Caroline said while speaking about Alameda loans.
In a statement, the ex-girlfriend claimed that SBF wanted to buy more FTT tokens to avoid any risk on loans, as the trading firm was borrowing billions from Genesis by using FTT as collateral. She said that it was misleading to put FTT tokens on Alameda’s balance sheet.
Gary Wang’s Continued Testimony
Caroline’s testimony began right after Gary Wang’s unfinished testimony, in which he said that he wrote code that ultimately enabled the FTX fraud.
The defense attorney, Christian Everdell, opened the proceeding by cross-examining the FTX co-founder Wang about pre-and-post-FTX-collapse and his conversations with prosecutors. Wang was also asked if he knew about Caroline’s decision not to hedge Alameda’s positions, to which he responded that she was the CEO, adding, “I don’t know who made the decision.”
Wang was also questioned by Judge Lewis Kaplan about the loans he signed. The judge noted a particular $35 million loan and asked what it was for, and Wang said that it was for a company in which SBF wanted to invest.