"He asked me to do it all!" Standing in the federal court in Manhattan, New York, 28-year-old Caroline Ellison pointed at her ex-boyfriend Sam Bankman-Fried (hereinafter referred to as SBF), accusing the latter of being the mastermind of the FTX tens of billions of dollars in fraud.
As SBF's ex-girlfriend and a core executive of the company, Alison is perhaps the person who knows SBF best in the world. Her testimony completely stripped away the "innocent" image SBF had created for itself, allowing the outside world to see the true face of a liar who wantonly stole tens of billions of dollars in client funds. SBF carefully designed its image as a cute tech otaku with wild hair, and even thought about suppressing its competitors with black hands before going bankrupt.
Seven charges carry up to 115 years in prison
On Tuesday morning, Allison walked into a Manhattan federal courtroom surrounded by reporters and cameras and escorted by security. She clutched her shoulder bag tightly and stared blankly ahead. Her eyes behind the thick glasses were hollow and fearful. Compared with her previous youthful image, Alison is obviously much more haggard when she appears in the public eye again.
As the main suspect in the fraud case, she was of course under tremendous psychological pressure. In November last year, the world's third largest cryptocurrency exchange was exposed to embezzlement of investor funds and filed for bankruptcy protection in just two weeks. SBF was accused of secretly transferring more than $10 billion of customers' deposits on the exchange platform to its own hedge fund Alameda Research through backdoor means.
The federal prosecutor asked her to identify SBF in public. Alison spent 10 seconds in a daze, stretching out the index finger of her right hand and pointing to the dock where SBF was standing. There was no expression on SBF's face. The two men, who had not seen each other for almost a year, could not make eye contact in the courtroom. The 31-year-old SBF sat expressionlessly in the dock, looking at the person who was once the closest to him and seemed to have accepted all the endings.
Since Monday is a holiday (Columbus Day, now also known as Aboriginal Day) in the United States, the government courts are closed for the day. Therefore, the Federal Court in Manhattan, New York, reopened the FTX fraud case on Tuesday, and Alison, the most important witness in the case, also appeared in court to testify. Her testimony will directly determine the fate of her ex-boyfriend SBF.
The two spent five years together. They once worked as colleagues in New York and devoted themselves to charity together. Then they started businesses together in San Francisco and Hong Kong, and finally became lovers at FTX. The two spent a sweet time at SBF's Caribbean-view mansion in the Bahamas, and eventually their relationship faded away.
People who once loved each other are now in court. In a New York courtroom on Tuesday, Alison stood for nearly four hours, answering the prosecutor's questions one by one and testifying against her ex-boyfriend's fraud. If convicted on all seven counts, SBF faces a maximum sentence of 115 years and will spend the rest of his life in prison.
The two have not seen each other for almost a year, and the last time they met was in court. After the collapse of FTX at the end of last year, at the request of the US judicial authorities, the Bahamian police arrested SBF and Alison and other main suspects in the FTX case in December last year. They were later extradited to the United States to face trial.
Threatening to release ex-girlfriend’s diary
As SBF's girlfriend and partner, Stanford graduate Alison is the most critical suspect and witness in this fraud case. She is the CEO of Alameda Research and manages this cryptocurrency hedge fund for SBF. In other words, Alison was a direct participant and insider of all client funds secretly transferred by SBF.
After being arrested in December last year, Alison and FTXCTO Gary Wang quickly chose to plead guilty and promised to actively cooperate with regulatory authorities in their investigations and were willing to testify in court in exchange for a lighter sentence. Most of the suspects in the FTX fraud case have pleaded guilty and are willing to cooperate with the investigation. Only the main culprit SBF himself has refused to plead guilty so far, insisting that he is innocent and only made business decision-making mistakes when running the company.
Before Alison appeared in court to testify this week, another core witness in the case, Gary Wang, had already appeared in court last Thursday, accusing SBF of being the mastermind of the fraud. This mysterious Chinese programmer graduated from MIT and worked for Google briefly. Later, he founded FTX together with SBF in 2019, and he held the position of CTO. His personal assets peaked at US$6 billion.
Gary Wang is an excellent programmer, but SBF himself is not good at programming. He also admitted that he had not written a single line of FTX code, and all his ideas had to be turned into code by Gary Wang. As CTO, Gary Wang is the direct person in charge of the FTX code base and the specific implementer of the backdoor.
Gary Wang unmistakably told the jury that shortly after founding FTX in July 2019, SBF himself personally instructed him to write special code to grant the Alameda Fund secret backdoor privileges in FTX to allocate customer funds on the exchange at will. Alameda has privileges that other accounts on the FTX platform cannot even imagine. “SBF told me to keep Alameda’s account on FTX forever.”
Also coming forward to accuse SBF was his college classmate and long-time best friend Adam Yedida. He briefly worked at FTX for two months, developing software code for the platform. Because his working hours were very short and he actively cooperated with the investigation and testified, Yedida was not prosecuted. After testifying against SBF, Yedida said with a complicated expression that the latter was still her good friend, while SBF remained expressionless.
From the beginning of the trial that began last Tuesday, SBF's parents have been sitting in the gallery, watching expressionlessly as their son was being tried. They are both well-known professors at Stanford Law School. SBF was once their pride. Bankman and Fried were his parents' surnames respectively. At the beginning of this year, they also provided a guarantee of up to 250 million US dollars to take their son home and release him on bail pending trial.
After being released on bail, SBF flew first class and returned comfortably to his home in Palo Alto, Silicon Valley. He could still access the Internet, but he had to come to New York regularly to attend hearings. However, this comfortable treatment that did not seem to belong to the fraudster was canceled by the judge in August this year, because SBF contacted Alison privately and threatened to send her private diary to the media.
This intimidation of witnesses breached the terms of SBF's bail. SBF had to leave his Silicon Valley mansion and return to New York to squat in a detention center. Interestingly, the detention center where he was located was the place where the notorious sexual predator Jeffrey Epstein finally committed suicide under mysterious circumstances, and the SBF’s lead defense lawyer also defended Ghislaine Maxwell in Epstein’s case.
Stealing $14 Billion and Wanting to Run for President of the United States
Obviously, the testimony of ex-girlfriend Alison is what SBF is most worried about. Her testimony will also completely undermine SBF's defense of innocence. Alison manages the hedge fund Alameda Research for SBF. She knows all of SBF's backdoor operations and the ins and outs of every fund.
Sure enough, Alison's testimony almost turned SBF upside down, whether it was his fraud methods or his personal image. As a former pillow person, Alison may be the person who knows SBF best in the world.
In the first 15 minutes of her testimony, Allison repeatedly highlighted SBF as the culprit for FTX’s collapse. She clearly stated that it was SBF who asked her to transfer client funds from FTX to Alameda funds, and even used FTX client money to pay for Alameda's loan repayments.
How much customer funds did Alameda illegally transfer from FTX? According to Allison’s testimony, the total amount before and after was $14 billion, of which Alameda only repaid a small portion. When FTX collapsed, Alameda only had $4 billion in assets, but "borrowed" $12 billion from FTX.
Faced with Alison’s testimony, the SBF defense team continued to bite back, claiming that it was Alison’s own inappropriate behavior and ignoring SBF’s warning that led to the collapse of FTX. The legal team stated that the reason why Alison put all the responsibility on SBF was just to clear her criminal behavior.
In 2017, Alison joined Alameda, a cryptocurrency hedge fund founded by SBF, first as a trader and then as CEO. It was also during this period that the relationship between the two heated up rapidly, and their love for a long time finally became live-in lovers in 2021.
In a few years, Alison followed SBF from San Francisco to Hong Kong, and eventually moved to the Caribbean island country of the Bahamas, living in SBF's $30 million ocean-view mansion. In addition to them, there are several executives of FTX in the huge mansion.
Alison's voice softened a lot when talking about their relationship. According to her, SBF is a very ambitious man, very confident in his business and operations, and even believes that he has a 5% chance of being elected President of the United States. I used to be an admirer of SBF.
In this relationship, SBF took the absolute initiative and once asked Alison to keep the relationship absolutely confidential. She accepted this unequal relationship. "He is my boss and the owner of the company. He pays my salary and can fire me at any time."
In the end, the relationship between the two broke down because Alison could not accept that she was always ignored. "He was often indifferent to himself and lacked attention." According to her description, the two decided to end their relationship in the summer of 2022.
Fabricated multiple balance sheets
Alison was fully aware of and deeply involved in SBF's fraud. According to her testimony, she was well aware of SBF's illegal operations. Shortly after joining Alameda, she discovered that the fund's condition was "much worse" than the SBF had said. Not only did Alameda suffer huge losses, but it also needed an infusion of capital. This is the original intention of FTX.
In fact, SBF first founded the cryptocurrency hedge fund Alameda in 2017, and two years later founded the cryptocurrency trading platform FTX. To a certain extent, FTX is the “cash machine” created by SBF for Alameda.
However, FTX’s rapid success made SBF the most high-profile billionaire. In just two years, FTX has received US$2 billion in financing from established venture capital institutions such as Sequoia. In early 2022, its valuation even reached US$32 billion. It has millions of users around the world and has become the third largest cryptocurrency trading platform.
Behind the rapid rise of FTX is their expensive advertising and marketing. FTX not only invested in the naming rights of the Miami Heat's home stadium and became the official sponsor of the NBA and MLB, but also signed well-known sports superstars such as American football superstar Tom Brady, NBA superstars Curry and O'Neal, and tennis star Naomi Osaka to endorse its platform, attracting their fans to deposit funds in FTX for investment.
However, what these millions of users did not expect was that FTX was actually a cash machine for SBF hedge fund Alameda. According to Allison’s testimony, SBF recklessly withdrew funds from FTX for its own use. In 2021, FTX repurchased US$2 billion in shares held by Binance, using customer deposits on the FTX platform.
Alison is not without doubts. She has many doubts about FTX's violation of customer deposits, Alameda's financial situation, and the actual value of the token FTT. However, SBF assured her that FTT would maintain a reasonable value, so Alameda's business would not be turbulent and the issue of transferring funds from FTX would not cause problems. However, in order to ensure the value of FTT, Alameda needs to conduct large-scale repurchases on a regular basis, and these funds come from FTX user deposits.
When Alison occasionally mentioned FTT's repurchase operation in the office, she was severely reprimanded by SBF, so it was an operation that SBF wanted to keep strictly confidential. If it is leaked to the outside world, it means that the outside world may find that FTT is actually worthless.
In order to cover up their illegal operations, SBF required both FTX and Alameda executives to use the "burn after reading" Signal application for internal communication to prevent future evidence of crime. SBF even stated within the company, “Unless you think the content can appear in the New York Times, you can write it on Slack’s internal collaboration platform.” In other words, anything that the outside world cannot know must not be written.
According to Alison’s recollection, in June 2022, when the cryptocurrency lender Genesis requested to recover a large loan, they proposed to review Alameda’s balance sheet. However, SBF asked Alison to make a false balance sheet because Alameda’s assets at the time were almost all FTX customer funds.
The executive teams of Alameda and FTX fabricated several false balance sheets, and SBF finally selected one of them to hand over to Genesis; the false balance sheets concealed the $10 billion that Alameda illegally stole from FTX, making it appear that Alameda had enough assets to repay all loans.
After FTX went bankrupt at the end of last year, Genesis also filed for bankruptcy in January this year due to insufficient liquidity, becoming another cryptocurrency company affected by FTX. In 2022, Genesis issued a total of US$130 billion in cryptocurrency loans, with a transaction size of US$116.5 billion. However, when it filed for bankruptcy protection, Genesis was unable to repay US$3 billion in liabilities.
Keep random hair and open Toyota Black Binance
In October 2022, before the thunder of Alameda and FTX, Alameda's internal balance sheet showed that the fund had liabilities of US$15.6 billion, but they told creditors that it was only US$8 billion. In order to make up for the growing funding gap, SBF has thought of various options to raise money: either acquiring cryptocurrency lender BlockFi, or selling more shares, and even plans to raise money from Middle Eastern tycoons, especially Saudi Crown Prince Mohammed bin Salman.
When it was almost desperate, SBF was still thinking of various tricks. He plans to launch a black PR campaign against his competitor Binance and use regulatory authorities to suppress Binance. This may help FTX get more customers and funds.
SBF has always attached great importance to media relations and channels. He is willing to spend a lot of time dealing with the media and establish good relationships with them. He has invested in cryptocurrency vertical media Semafor and TheBlock, and is also considering investing in mainstream media such as Vox and Forbes. When Musk spent $44 billion to acquire Twitter, SBF also planned to invest $4 billion to participate in the acquisition, but in the end Musk did not take his money.
Even the iconic messy hair is SBF’s deliberate packaging. Because SBF feels that this image of a tech nerd can make him appear reassuring and trustworthy. In order to show off to the outside world, SBF even chose a cheap Toyota Corolla to show his image of "not enjoying himself". SBF even told the New York Times that it planned to donate all its assets.
Even at the end of last year after the revelations came to light, SBF participated in the New York Times’ DealBook Business Summit via video in an attempt to completely clear itself. "I was also shocked by what happened. I never tried to defraud anyone." He later said that he regretted filing for bankruptcy and that it was the regulatory authorities that made the problem worse. This was also his last public interview. After the arrest, SBF handed everything over to the legal team.
When FTX went bankrupt last November, Alison was on vacation in Japan. When communicating with SBF's Signal, she said, "This is the best mood she has had in the past year. She feels a sense of relief because she no longer has to lie."