The New York Times has reported that Caroline Ellison, the 27-year-old CEO of crypto hedge fund Alameda Research, could be a key witness in the upcoming criminal trial of Sam Bankman-Fried, the founder of cryptocurrency exchange FTX. 

Bankman-Fried is accused of misusing billions of dollars taken from customer accounts and faces eight counts of fraud and election law violations.

Ellison, who was also a top executive in Mr. Bankman-Fried’s business empire, is said to have recorded her thoughts on private Google documents that have been reviewed by the New York Times. 

The documents, which have not been previously reported, offer new insight into Ellison’s psychology during the final months of FTX.

According to The New York Times report, Ellison’s private writings reveal that she was breaking up with Sam Bankman-Fried, FTX’s founder, and was racked with self-doubt about her abilities to lead Alameda Research. 

In one Google document addressed to Bankman-Fried in April 2022, Ellison wrote that an earlier breakup with him had “significantly decreased my excitement about Alameda.”

Furthermore, court records show that Bankman-Fried invested over $400 million in Modulo Capital, another trading company led by a different former Jane Street trader whom he had also dated, as he lost faith in Alameda Research. Ellison expressed jealousy and resentment toward Modulo in some of her writings and felt she was being squeezed out.

In May 2022, the cryptocurrency market crashed, leading to a significant drop in coin prices and the bankruptcy of several prominent companies. During this crisis, regulators alleged that four individuals associated with Alameda Research, including Bankman-Fried, Gary Wang, Su Zhu, and Caroline Ellison, filled a hole in the company’s accounts using billions of dollars in customer funds deposited with FTX.

Moreover, according to the report, FTX’s troubles began when Changpeng Zhao, the CEO of Binance, the world’s largest crypto exchange, sold his stake in FTX back to Bankman-Fried in exchange for FTT tokens. 

Zhao later expressed concerns about FTX’s financial stability, causing a sell-off of FTT and a rush by traders to withdraw their funds, which led to an $8 billion shortfall. Binance offered a loan to save the company but later pulled out, forcing FTX to file for bankruptcy in November 2022.

In November 2022, Bankman-Fried’s business empire collapsed after a run on deposits exposed an $8 billion deficit. He was later arrested in the Bahamas and is now under house arrest at his parents’ home in Palo Alto, California.

Ellison has been charged with committing fraud and using customer funds to prop up Alameda Research, which she has admitted to and expressed remorse for. She is expected to be a key witness in Bankman-Fried’s trial, which will last four or five weeks and revolve around messages exchanged on the messaging app Signal between the defendants.

The case against Bankman-Fried is speeding toward a courtroom showdown in Manhattan. The judge in the case has set a brisk schedule for the run-up to the trial, asking prosecutors to come up with a witness list and produce other final materials. Prosecutors are expected to begin preparing at least some witnesses in August.

The trial is scheduled for October 2, and Ellison is expected to be a star witness. Two other top FTX executives, Nishad Singh and Gary Wang, pleaded guilty and agreed to cooperate.

As a woman in the “male-dominated” crypto industry, Ellison may appear more sympathetic to the jury than the other cooperators, according to lawyers familiar with the case. 

The trial is set to last four or five weeks and will likely involve messages exchanged on the messaging app Signal between Bankman-Fried and the three cooperators. Ellison’s personal and professional life during the final months of FTX, as recorded in her private writings, could be crucial in the criminal trial of Bankman-Fried.

Featured image from Unsplash, chart from TradingView.com 

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