FTX chief’s ex-girlfriend helped end reign of the crypto king

Bankman-Fried jailed for 25 years after his former partner testified against him

Caroline Ellison and Sam Bankman-Fried were similar in manyways. Both were the children of academics, both were hailed as maths geniuses and both embraced “effective altruism” – a philosophy that involves making large sums of money to fund philanthropic pursuits that benefit society to the greatest extent possible.

Onpaper, it seemed like a match made in heaven. They met on Wall Street in 2015 and became lovers and colleagues – building FTX, a cryptocurrency empire once revered and promoted bythe stars.

Now, eight years on, Ellison played a key role in bringing down her former beau as she became the star witness in his multi-billion-dollar fraud trial and sentencing that landed him with 25 years in prison. Bankman-Fried was sentenced yesterday to 300 months in prison and forced to forfeit $11.2bn (€10.4bn) based on the seven charges of which he was found guilty – two counts of fraud and five counts of conspiracy.

His dramatic fall from grace comes after Ellison pleaded guilty to seven counts of fraud and conspiracy. It was a plea deal reached with prosecutors that would grant her a more lenient sentence in exchange for giving damning testimony against her ex-boyfriend.

Bankman-Fried and Ellison first met at Jane Street Capital, a Wall Street trading firm, in the summer of 2015, when he was assigned to teach her class of interns how to trade. It was here Ellison said she first became infatuated with Bankman-Fried. Three years later, Ellison would be persuaded to quit Jane Street Capital to go and work for him at Alameda Research as his CEO.

Just two weeks into the job, Ellison called her mother and sobbed into the phone that she’d made the biggest mistake of her life, according to the Wall Street Journal. Alameda’s dissatisfied partners had persuaded the company’s lenders to demand their moneyback after they had become disillusioned with Bankman-Fried and the programming software he had developed to trade Bitcoin for more than its worth.

In 2019, Bankman-Fried went on to launch the FTX trading platform.

When the value of Bitcoin soared in 2021, FTX became one of the largest crypto traders in the world, worth an estimated $32bn. But FTX’s financial success was not matched by Alameda, whose finances were in a state of chaos owing to its trading system, Model bot.

It had been created by Bankman-Fried and was programmed to trade roughly 500 different crypto coins on 30 or so different unregulated crypto exchanges.

The system had caused the company to lose millions over the years. As a result, Ellison said, Bankman-Fried directed her to use FTX customer funds to prop up Alameda.

During the trial, Ellison testified she committed crimes at the company, including “fraud, conspiracy to commit fraud and money laundering”.

But she insisted the crimes were committed with Bankman-Fried – and he had been the mastermind.

By contrast, Bankman-Fried insisted Ellison was responsible for Alameda’s financial woes, after she failed to hedge its financial positions early in 2022 to insulate the fund from the market. His defence also focused on the pair’s onand-off relationship, which turned romantic in 2018 and caused problems in their working relationship. The pair broke up in 2022.

Meanwhile, both companies continued to lose money. Finally, in November 2022, the crypto trade publication Coindesk published a leaked balance sheet showing Alameda’s value was built on a “foundation largely made up of a (digital) coin that a sister company invented”. FTX customers raced to withdraw their funds, exposing an $8bn deficit in FTX’s accounts.

Bankman-Fried’s personal wealth fell by an estimated $16bn in a single day. FTX filed for bankruptcy days later and Bankman-Fried resigned as CEO. He was arrested in the Bahamas on December 12. Ellison was also arrested.

They both pleaded innocence but questions started to grow around whether the former lovers would turn on each other. That question was answered when it emerged Ellison had struck a deal with prosecutors and changed her plea.

Her testimony was damning, giving jurors a personal insight into the life behind the crypto empire – and levelling the lion’s share of the blame on Bankman-Fried. And it appears to have worked as Bankman-Fried sat motionless, looking down at his hands in his lap when the guiltyverdict was read out.

Meanwhile, Ellison’s fate is yet to be decided. (© The Independent)

‘Ellison testified she committed crimes at the company. But she insisted that the crimes were committed with Bankman-Fried – and he had been the mastermind’