Her testimony follows that of two other Bankman-Fried confidants and top lieutenants who told jurors last week that the executive orchestrated a massive fraud on customers of FTX, his crypto trading platform. Adam Yedidia, a college friend of Bankman-Fried who joined FTX as a software developer, said he resigned after he caught wind of the conduct as the company unraveled. And Gary Wang, who has also pleaded guilty to committing financial crimes as FTX’s chief technology officer, testified Bankman-Fried stole $8 billion from customers and publicly lied about it.
Ellison pleaded guilty in December to seven counts, including wire fraud and securities fraud, and agreed to cooperate with prosecutors in expectation of receiving a lighter sentence. She said she participated in the scheme central to prosecutors’ case, defrauding FTX customers by using their funds to repay debts of his hedge fund, Alameda Research.
“I am truly sorry for what I did,” Ellison said in December appearance in Manhattan federal court to enter her guilty plea. “I knew that it was wrong.”
Bankman-Fried faces sweeping allegations that he plundered billions of dollars in FTX customer funds without their knowledge to make risky investments, buy luxury real estate, issue huge loans to his inner circle and donate tens of millions of dollars to politicians in both parties.
If convicted, he could serve decades in prison. He has pleaded not guilty.
Prosecutors argue Ellison was instrumental in Bankman-Fried’s alleged crimes. Nathan Rehn, the assistant U.S. attorney who delivered the government’s opening statement last week, said Bankman-Fried installed her as a “front” atop Alameda while he continued to call the shots behind the scenes.
Defense lawyers presented a different version of events. They cast Ellison as in part responsible for the crypto firms’ implosion by failing to heed a warning from Bankman-Fried to position Alameda for a potential downturn in the price of crypto assets.
As a witness, the Stanford-educated mathematician brings a heady mix of personal and professional insight into Bankman-Fried’s conduct, former federal prosecutor Adam Kamenstein said.
“She’s going to establish that not only did Sam operationally know what was going on but that he was lying about it,” Kamenstein said. “It’s going to be game over.”
Bankman-Fried and Ellison first met when they both worked at Jane Street Capital, a proprietary investment firm in New York City. Bankman-Fried quit in 2017 to found Alameda, recruiting Ellison to join him the following year. He promoted her to co-chief executive of the firm in 2021, and later, sole CEO, while he continued to own a majority of the fund.
But Ellison had deep misgivings about her abilities as a leader — anxiety that was compounded by her on-again, off-again romantic relationship with Bankman-Fried, according to private writings that Bankman-Fried later leaked to the New York Times. That leak led Judge Lewis A. Kaplan to revoke Bankman-Fried’s bail that had allowed him to live under house arrest in his parents’ home in Palo Alto, Calif. He has been imprisoned since in a Brooklyn jail.
In her plea appearance, Ellison said she knew since 2019 that Alameda had “backdoor” access to FTX customer funds, effectively giving the firm an “unlimited line of credit without being required to post collateral.”
She also discussed Alameda’s numerous big, risky bets in venture deals and personal loans to FTX executives, saying those were financed with loans from external lenders “worth several billion dollars.” When those creditors recalled their money, Bankman-Fried and his team tapped FTX customer funds to pay them back, she said.
Ellison said she worked with Bankman-Fried and others to lie to Alameda’s lenders about its soundness, including by doctoring some financial statements. And at Bankman-Fried’s direction, she worked secretly to inflate the market price of FTT — a cryptocurrency issued by FTX and used by Alameda to prop up its balance sheet — to improve the appearance of the firm’s financial health to those lenders, prosecutors say.
Throughout her time there, Ellison kept detailed records of the state of the business and the efforts of Bankman-Fried and his closest advisers to manage as the enterprise began deteriorating amid a wider industry downturn in 2022.
She “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,” prosecutors wrote in an August court filing outlining the evidence they plan to use at the trial. Her records included a list titled “Things Sam is Freaking Out About,” which named Alameda’s trading positions, bad press about the entanglements between FTX and Alameda, and fundraising, according to the filing.
Ellison will also likely offer a window into the head-spinning collapse of the business in early November last year. As FTX faced a solvency crisis, with a cascade of customers attempting to pull their deposits and rival exchange Binance exploring a short-lived bid for the company, Ellison gathered Alameda employees to offer a tearful explanation, according to a recording of the meeting obtained by prosecutors.
Alameda “ended up borrowing a bunch of funds on FTX” to repay its creditors,” she said. “I guess, mostly I wanna say, like, I’m sorry. This really sucks.”
Asked by an employee who had made the call to take FTX customer money, she said, “Um … Sam, I guess.”
