Professor Elam

When an employee asked who decided to take customer funds, Ellison hesitated, then said, “Sam, I guess.”

She is set to be a star witness at Bankman-Fried’s fraud trial, which begins this week. The prosecutors have called the collapse one of the biggest financial frauds in U.S. history. 

Ellison, 28 years old, will join two other members of his onetime inner circle—FTX co-founder Gary Wang and engineering director Nishad Singh—in taking the stand to tell the exchange’s behind-the-scenes story.  

The testimony from Ellison has the potential to be particularly personal and raw. In her writings, she has detailed her complicated and sometimes romantic relationship with her boss and her interest in polyamory. These topics could provide fodder for cross-examination.

“At bottom, every fraud case is just a human drama,” said Jordan Estes, a former federal prosecutor now at the firm Kramer Levin. “Caroline is the likely vehicle for getting a lot of that out.”

The trial, which starts Tuesday, will mark the first time Ellison has spoken publicly about FTX since its collapse. She drew attention this summer after 31-year-old Bankman-Fried shared her private writings with a reporter. The move kicked off a process that ultimately led the judge presiding over Bankman-Fried’s criminal case to jail the FTX founder while he awaits trial.  

Ellison has pleaded guilty to seven criminal counts—more than Wang or Singh—and agreed to cooperate with the government. Prosecutors have said that she not only was involved in criminal activity ranging from bribery in China to defrauding FTX customers of billions of dollars but also acted at Bankman-Fried’s direction. Her lawyer declined to comment.

Bankman-Fried has pleaded not guilty. His lawyers say that prosecutors haven’t adequately established that Ellison acted at his direction. His spokesman declined to comment. 

Ellison met Bankman-Fried at the trading firm Jane Street Capital and joined Alameda as a trader in 2018. The daughter of two MIT professors, she grew up in the suburbs of Boston and graduated from Stanford University with a math degree.  

“Before I did any trading, I didn’t really consider myself a, like, trader-y person,” Ellison said on an FTX podcast. “It’s sort of something I’ve learned more on the job and had, like, a super strong natural instinct towards.”

Ellison’s testimony could include Signal and Slack messages, her handwritten notes from meetings, and lists she made, such as one titled “Things Sam is Freaking Out About.” That list includes Ellison’s understanding of Bankman-Fried’s concerns about subjects including Alameda’s trading, bad press coverage and fundraising, prosecutors said. 

Bankman-Fried shared a similar background with Ellison, growing up on Stanford University’s campus, where his parents taught at the law school. He studied physics at the Massachusetts Institute of Technology before he worked at Jane Street and founded Alameda in 2017. 

Bankman-Fried named Ellison and another colleague, Sam Trabucco, as co-CEOs of Alameda in 2021, saying that he wanted to focus on his new project, the crypto exchange FTX. Ellison, who was known among employees as a smart and kind boss, handled day-to-day operations and trading at Alameda. 

Prosecutors said that while Bankman-Fried distanced himself publicly, he privately maintained control and directed the trading firm’s criminal activity.

At work, Bankman-Fried was often the decision maker when Ellison didn’t have a strong opinion, people familiar with them said, describing Ellison as not one to push back. 

Bankman-Fried and Ellison’s on-again, off-again romantic relationship dates back to at least 2021 and ran into 2022, according to people who know them. 

By early 2022, Bankman-Fried had become known as a crypto wunderkind, inking promotional deals with celebrities including quarterback Tom Brady and comedian Larry David.  

Bankman-Fried, Ellison, Singh and Wang misappropriated more than $1 billion between 2020 and 2022, buying luxury real estate, bankrolling pet projects and financing large loans and bonuses, FTX’s new management has alleged in federal bankruptcy court.

Prosecutors say there were two ways that executives moved billions of dollars of FTX customer money to Alameda: by secret code and by having FTX users deposit funds in bank accounts controlled by Alameda.

One big-ticket purchase that allegedly involved customer funds was a $30 million six-bedroom penthouse in a resort community in the Bahamas. Bankman-Fried, Ellison, Wang and Singh lived together in the luxury apartment while running FTX and Alameda. According to people who know them, the four would spend some evenings eating vegan meals and playing bughouse chess, a variation of the game involving two boards and four players. 

Alameda and FTX also used the customer money for speculative investments in technology companies and cryptocurrencies. 

The risky bets caught up with Alameda when the crypto market slumped in the summer of 2022. After lenders demanded the firm repay outstanding loans, Bankman-Fried authorized the trading firm to draw down billions in FTX customer assets, according to the indictment. 

On Nov. 2, the crypto website CoinDesk published what purported to be a leaked Alameda balance sheet, causing a run on customer funds. 

As pressure mounted, Bankman-Fried directed Ellison to reassure customers on Twitter, prosecutors said. They said Alameda began liquidating its assets at Bankman-Fried’s direction. 

“I just had an increasing dread of this day that was weighing on me for a long time, and now that it’s actually happening, it just feels great to get it over with one way or another,” Ellison wrote in a message to a former co-worker.

On Nov. 11, Bankman-Fried resigned and FTX filed for bankruptcy. Thousands of customers were left without billions of dollars in funds. 

Bankman-Fried remained in the Bahamas, where he was arrested on Dec. 12. A week later, in Manhattan, Ellison signed a formal cooperation agreement. The Southern District of New York requires a cooperator to detail every crime committed.

Ellison pleaded guilty to crimes including fraud offenses and conspiring to commit money laundering. The total maximum sentence was 110 years in prison, the judge told her.   

She told the judge she had conspired with Bankman-Fried to lie to lenders and to hide the true nature of the relationship between Alameda and FTX. “I am truly sorry for what I did,” she said. “I knew that it was wrong.”

The payoff for cooperation can be high. If Ellison provides substantial assistance to prosecutors, her agreement says that they will write the judge a letter requesting leniency. White-collar cooperators who receive such a letter often aren’t sentenced to a prison term, lawyers said.

Ellison will still be required to repay proceeds from her crimes, and has agreed with securities regulators to conditions that effectively bar her from many finance jobs.

Still, she would likely be free to pursue her nonfinancial passions.

“My family keeps asking me when I’m going to finish my novel,” Ellison said on a 2021 FTX podcast, “and I tell them probably when I’m not working at Alameda anymore, or at least when I take a long vacation.”

Hannah Miao, Alexander Osipovich, Caitlin Ostroff contributed to this article.

Here is a great youtube on just how outrageous the the outright theft of customer money became