The second week of Sam Bankman-Fried’s closely-watched criminal lawsuit brought up allegations the former FTX chief executive approved bribes of Chinese Communist Party officials, sought emergency funding from Saudi Prince Bin Salman and was aware of the day-to-day operations of Alameda Research, despite claiming he instituted a firewall between the exchange and hedge fund.
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Caroline Ellison, SBF’s former girlfriend and ex-CEO of Alameda, kicked off the week with explosive testimony on Tuesday. Like in the prosecutors’ examination of FTX co-founder Gary Wang last week, Ellison admitted to committing fraud early in her questioning. Both Wang and Ellison have taken plea deals with the U.S. Department of Justice (DOJ), along with another former FTX higher up, Nishad Singh, due to take the stand later in the trial, which could lead to reduced penalties for their professed crimes.
Ellison’s testimony covered her rocky relationship with SBF, her anxieties about Alameda’s nearly unlimited line of credit at FTX and the ways SBF coached the naturally timid math major through becoming the face of one of crypto’s most valuable trading firms. At least once on the stand Ellison broke into tears while discussing the tumultuous days leading up FTX’s collapse, when it became clear the exchange could not cover all the necessary customer withdrawals. (Exchanges, unlike banks, are not supposed to invest or spend deposits.)
See also: Who Is Alameda Research’s Caroline Ellison?
Ellison also discussed the relief she felt when a doctored version of Alameda’s balance sheet was leaked to CoinDesk, leading to the publication of an award-winning article that cast doubt on the solvency of SBF’s crypto trading empire. FTX could not meet its obligations to customers, Ellison said, because the money had been stolen.
According to Ellison, FTX customer funds were withdrawn to meet many of Alameda’s financial obligations, including loans it took out from crypto lenders and to patch holes in the balance sheet after several of the supposedly market neutral hedge fund’s crypto investments went bad.
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