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Last year, as cryptocurrency company FTX and sister trading firm Alameda Research were melting down, Alameda CEO Caroline Ellison held an all-hands meeting and told staff that Alameda had taken customer deposits from FTX and could not pay them back. When asked in the meeting by an employee whose idea it had been to use customer funds, “Sam, I guess” was Ellison’s answer.
Today, at the end of Ellison’s testimony during the trial of Sam Bankman-Fried, or SBF for short, prosecutor Danielle Sassoon asked why she had qualified her answer. The “I guess,” explained Ellison, was just a vocal tic. It wasn’t a question. It had been Bankman-Fried’s idea the entire time, she alleged.
It was an appropriate ending to the much anticipated testimony of the prosecution’s star witness, who was both Bankman-Fried’s on-again off-again romantic partner and alleged partner in crime. Ellison has pleaded guilty to seven counts of fraud, while Bankman-Fried has pleaded innocent. Both face over 100 years in prison.
Here are some highlights from the first week and a half of crypto’s biggest trial.
SBF is on trial for fraud and money laundering, not for bribing Chinese officials, but the most lurid and surprising part of Ellison’s testimony took the jury and gallery on an absurd digression.
In 2021, Chinese officials froze Alameda’s account on Chinese crypto exchanges as part of their money-laundering investigation into someone else. For the next year, the FTX and Alameda teams made increasingly desperate and risky moves in order to recover the money. This included hiring lawyers, as well as creating accounts in the names of “Thai prostitutes” to execute “trading strategies” to move the money. (Said information about the accounts came from FTX executive Ryan Salame, Ellison testified, which raises some questions of its own.)
Finally, Ellison alleged, SBF became sympathetic to what one employee had called “his way” of fixing the issue. Alameda eventually paid about $150 million to Chinese officials, Ellison said. In a memo, she later referred to this as “$150 million from the thing?”—“the thing” being the alleged bribery.
“The thing” upset Alameda employee Handi Yang, the daughter of a Chinese official. When Yang wouldn’t stop arguing against the idea, SBF yelled at her to “shut the fuck up,” Ellison claimed. Later, in a group chat with SBF, Ellison, and another Alameda employee, the other employee joked about Yang’s father “turning us in immediately,” to which SBF responded: “lol.” This exhibit also resulted in Ellison explaining the meaning of “lol” to the judge and jury.
As the crypto world began to melt down in mid-2022, lenders started asking for money back from Alameda. Alameda, too, was hurting—affected by the market downturn and also hobbled by its borrowing from FTX.
When crypto lending desk Genesis asked for a look at Alameda’s balances, Ellison initially made a fairly standard balance sheet and sent it to SBF for approval, she claims. He then allegedly asked her to find “alternative ways of presenting the information.” Ellison was able to come up with seven alternatives that made Alameda’s financials look less risky, in part by renaming the amount borrowed from FTX, and sent the one approved by Bankman-Fried to Genesis.
During cross-examination, defense attorney Mark Cohen continually tried to stress that Alameda’s total net value assets were the same across the alternatives, and Ellison kept responding that, yes, but the balance sheets were still misleading.
According to Ellison’s “things Sam is freaking out about” document, Bankman-Fried was stressed about “getting regulators to crack down on Binance,” bad PR, raising money from Saudi Crown Prince Mohammed bin Salman, and possibly buying Snapchat.
In time, the bad PR (and worse than bad PR) came true, SBF didn’t raise money from Mohammed bin Salman, and he certainly didn’t buy Snapchat, but regulators have cracked down on Binance.
Bankman-Fried got a haircut for the trial, which is somewhat ironic given that he allegedly saw it, Samson-like, as the source of his powers.
Ellison claimed that he said his mop of hair helped him get higher bonuses at trading firm Jane Street and was important for his image. Her testimony revealed the extent of Bankman-Fried’s obsession with his persona. For example, he and Ellison drove luxury cars in the Bahamas until he allegedly decreed that it was better for their image to drive a Toyota Corolla and Honda Civic, respectively. He courted the media as well, both by being easy to reach and by investing in media organizations such as Semafor and TheBlock, Ellison said.
In the media, Bankman-Fried tried to cultivate an aura of being obsessed with morals, specifically with the effective altruism movement, which focuses on evidence-based ways to improve the world. His more extreme moral beliefs, however, might not have passed muster if reported publicly.
According to Ellison, Bankman-Fried said that he was a utilitarian—and though some utilitarians still tried to live by rules like “Don’t lie” and “Don’t steal,” SBF didn’t agree with that. What mattered, and what he cared about most, she claimed he said, was maximizing the good.
He thought he had a 5 percent chance of becoming president, Ellison claimed, and would be willing to flip a coin if tails meant the world would be destroyed but heads meant it would be twice as good.
Two longtime friends of SBF—Adam Yedidia from MIT, and Gary Wang from math camp—testified this week. Yedidia, an FTX coder, claimed that customers who wanted to deposit fiat money (such as dollars or euros, rather than cryptocurrency) on the FTX exchange actually ended up sending that money to a bank account controlled by, and used by, Alameda. Yedidia testified under an agreement that he couldn’t be prosecuted for his testimony.
Wang, who cofounded both FTX and Alameda and served as chief technology officer, has already pled guilty and flat-out began by saying that he had committed financial crimes with SBF. In particular, Wang explained that FTX executives wrote code that gave Alameda privileges such as the ability to have a negative balance on FTX and the ability to borrow a $65 billion—so, essentially unlimited—line of credit.
Hardly the most consequential revelation, but perhaps the funniest: During his testimony, Wang was shown a SBF tweet claiming that FTX had a $100 million insurance fund. This was not true, and in fact the number they displayed had little to do with the actual amount in the fund. The number they publicized was calculated by taking the daily trading volume, multiplying that by a random number around 7,500, and dividing it by 1 billion.
